The Economic Storm You Can't Ignore: A Founder's Guide to Interest Rates and Fundraising

Introduction

Remember 2021? It felt like every startup with a slick pitch deck was raising money at eye-watering valuations. Fast forward to today, and the landscape has changed dramatically. Fundraising has become a grueling marathon, and many founders are left wondering, "What happened?”

The answer has less to do with your pitch deck or product than you might think. It's about macroeconomics. For too long, entrepreneurs have been operating without understanding these big-picture forces—most business education and startup advice simply doesn't cover macroeconomics. That's a mistake that can prove fatal to your business. If you're an entrepreneur, a small business owner, or an investor, understanding the economic weather is no longer optional—it's your most critical survival skill.

Why Fancy Pitch Decks Are Not Enough

At the center of the economic system is the U.S. Federal Reserve, often called the Fed. Given that the majority of venture capital originates from the U.S., understanding the Fed's actions is crucial. Think of the Fed's main committee, the FOMC, as engineers in the control room of the economy. They have one main lever: setting short-term interest rates.

• When they lower rates: They "heat up" the economy, making it cheaper to borrow money. This encourages spending and investment.
• When they raise rates: They "cool down" the economy to fight inflation. Borrowing becomes more expensive, and money becomes scarcer.

For years, we lived in an era of historically low, and even zero, interest rates (a policy known as ZIRP). This policy, designed to stimulate the economy, unleashed a flood of "cheap money" into the financial system.

The Cheap Money Hangover and Inflated Valuations

This flood of cheap capital had a massive impact on the startup world. With safe investments offering poor returns, investors poured money into riskier assets like venture capital, creating a "party" of seemingly free money.

This led directly to the inflated startup valuations of 2021, which "went to the moon" only to face a major correction the following year. These high numbers were often vanity valuations, driven by cheap money rather than solid business fundamentals.

The cheap money also fueled a dangerous "growth-at-all-costs" mindset. When capital is cheap, you can afford to lose money to acquire customers, just as Amazon did in its early days. But this model becomes a trap when the money spigot turns off. It encourages burning cash on vanity metrics instead of building a truly sustainable and efficient business.

Cheap money distorts a startup's reality and fuels founder hubris. When money flows, founders mistake fundraising for validation, believing their own hype while ignoring fundamental business flaws. As I explored in my article on founder ego and startup failure, this unchecked ego becomes fatal when founders refuse to adapt to market realities.

Cheap money rewards the wrong behaviors—prioritizing fundraising theater over customer discovery and grandiose visions over sustainable unit economics. When the money spigot turns off, these founders find themselves with inflated teams, unsustainable burn rates, and businesses that were never designed to generate real value.

The Coming Crisis and The Debt Doom Loop

Now, we face the real-world consequences of a national debt that has soared to over $37 trillion. Instead of a hypothetical future crisis, the true cost is hitting the budget today. The U.S. now spends over $870 billion a year on interest payments alone—more than the entire national defense budget. This isn't a distant threat; it's a present-day reality that limits our ability to invest in our future and respond to the next national emergency.

The government is trapped in a "debt doom loop," where it must issue new debt just to pay the interest on its old debt. Because of this, many analysts believe the Fed will be forced to turn to its only remaining tool: the money printer. Lawrence Lepard refers to this coming monetary expansion as "The Big Print"—a monetary expansion that will likely dwarf previous efforts.

This isn't just a theoretical problem. When the government prints money, it devalues the cash in your bank account. Your runway, your revenue, and your personal savings all lose purchasing power.

How to Navigate the Storm

So, what can you do? You need to align your strategy with this new macroeconomic reality.

1. Rethink Fundraising and Valuation:

• Focus on Fundamentals: In a world of expensive capital, profitability is king. Investors are now looking for sustainable business models, not just ambitious stories.
• Be Realistic: The valuations of 2021 are not coming back, the party is over! A fair valuation with a solid partner is far better than being anchored to an unrealistic number. Success is now about building a real business, not just raising another round.

2. Build for Productivity, Not Just Growth:

• Embrace Efficiency: Technology makes things naturally cheaper and more efficient—it is inherently deflationary. Build a business that does the same. Ask yourself and your team: "How does my product make things faster, cheaper, or better for my customers?"
• Solve a Real Problem: In a tight economy, customers pay for things that solve a real pain point. Focus on creating indispensable value, not just a "nice-to-have" product.

3. Manage Your Treasury with "Sound Money":

• Understand the Risk of Cash: Holding all your company's (and your personal) capital in fiat currency like the U.S. dollar is a massive risk in an inflationary environment.
• Discover "Sound Money": You should consider protecting your capital by allocating a portion of it to "sound money"—assets that a government cannot arbitrarily create. The two primary examples are Gold and Bitcoin.

Why It Matters: These assets have natural or mathematical scarcity. They are a form of "deflation insurance" because they have no counterparty risk and cannot go bankrupt. Due to its fixed supply, Bitcoin is "poised to benefit disproportionately" from the debasement of paper currencies. For founders and investors, allocating a meaningful portion of savings (the book suggests 25% or more) to these assets is a crucial strategy for preserving wealth over the next decade.

The next ten years are likely to be financially tumultuous. I anticipate an "economic earthquake" that will be far more significant than the 2008 Great Financial Crisis. But for those who understand the landscape, it also presents an enormous opportunity. By moving beyond vanity metrics, focusing on real productivity, and protecting your capital, you can not only survive the coming storm but emerge stronger on the other side.

A Must Read Book

If you want to understand how big economic changes will affect your money in the future, you should definitely read "The Big Print" by Lawrence Lepard. This book is super helpful for understanding today's economy and why everyone who owns a business or invests money needs to understand smart money ideas. It's more than just a book; it's like a guide to help you get through tough economic times.

Sources:

1. U.S. Department of the Treasury, FiscalData: "America's Finance Guide: National Debt"
2. U.S. Department of the Treasury, FiscalData: "Debt to the Penny"
3. Trading Economics: "United States Gross Federal Debt to GDP"
4. Pew Research Center: "Key facts about the U.S. national debt"
5. The Times of India: "Debt alarm: US national debt hits record $37 trillion, pace doubles with trillion added every five months"
6. Peter G. Peterson Foundation: "National Debt Clock"
7. Herndon, Ash, and Pollin (via Social Europe): "Higher public debt, lower growth?"
8. Wikipedia: "Growth in a Time of Debt"
9. Bank for International Settlements (BIS): "The real effects of debt"
10. Pescatori, Sandri, and Simon (International Monetary Fund): "Debt and Growth: Is There a Magic Threshold?"
11. Cato Institute: "The Impact of Public Debt on Economic Growth"
12. International Monetary Fund: "Fiscal Monitor, October 2024"
13. The Big Print: Lawrence Lepard, 2025