What Is ZIRP And How Did It Poison Startups?

ZIRP stands for “Zero Interest Rate Policy,” and it refers to a stretch of time - most recently throughout the pandemic - in which the Federal Reserve sets interest rates around 0% and commercial banks are able to borrow money for next-to-nothing.
In this episode of Dalton & Michael, we’ll talk about some of the downstream side effects we saw during this stretch of time: an explosion of unicorns, a surge of new investors, and the impact it had on the way founders think. We’ll share the advice we gave YC founders to brace them for the future, and how some companies made the right move in the middle of an unusual/unsustainable moment. Join us as we look back at how it all played out.
Apply to Y Combinator: yc.link/DandM-apply
Work at a Startup: yc.link/DandM-jobs
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 - Intro
00:12 - What is ZIRP?
01:51 - Why ZIRP
03:39 - The Corn Analogy
04:20 - Startups & Stocks
06:06 - Money ≠ Success
07:53 - Unicorns
09:55 - Winter Was Coming
11:15 - Lucrative Lending
12:56 - 3 Types of VCs
14:09 - Build for Endurance
15:24 - The Aftermath
17:45 - Outro

[@chapterme]

Chapters (Powered by ChapterMe) - 00:00 - Coming Up 00:12 - Intro: What is ZIRP? 01:51 - Why ZIRP 03:39 - The Corn Analogy 04:20 - Startups & Stocks 06:06 - Money ≠ Success 07:53 - Unicorns 09:55 - Winter Was Coming 11:15 - Lucrative Lending 12:56 - 3 Types of VCs 14:09 - YC Was Part of the Problem: Build for Endurance 15:24 - The Aftermath 17:45 - Outro

[@simonehong3700]

😢

[@olimpiakoslol3217]

1 minute summary of the video: ZERP, Zero Interest Rate Phenomenon, affected the startup world by flooding it with cheap money from the Federal Reserve and Banks. This led to an increase in VC funding, with investors eager to pour money into startups without much knowledge or experience in the field. Startups started focusing on scaling quickly and raising huge amounts of money, leading to inflated valuations and unrealistic expectations. Many companies struggled when interest rates went back up, causing the cost of capital to rise. Some founders built enduring businesses by focusing on building a great product, while others spent money unwisely and faced challenges when trying to raise more funds. The key takeaway is to balance optimism with realism and build a business that can withstand different economic climates. By being optimistic but realistic, founders can navigate through hype industries and create sustainable businesses.

[@aslkdjfzxcv9779]

💯

[@oluwafisayomioludare7385]

Thank you for this. Google recommended it, and I thought it was an article read. Thanks again

[@Eggs-n-Jakey]

thanks dude

[@JonibekJ]

Thats great idea, u can build startup around it and Get funded 10M.

[@huveja9799]

A summary: a lot of easy money is poison because it kills creativity, the Zero Interest Rate Phenomenon (ZERP) created easy money, most startups were taking that poison in industrial doses without having the antidote, now they are dying in flocks ..

[@ThaGamingLlama]

6:06 "during this time it was fuc-... it was amazing" lmaoo

[@thefocuschic3234]

This gotta be the funniest episode you've made, guys 😂

[@truongthinhpham]

I love the wisdom that these guys share over the years, but tbh, even the vibe alone is worth the time. Best advisor duo ever!

[@Max-ve5tu]

I imagine a lot of startups, scale-ups, and the likes are essentially worthless to the founders and employees after raising massive rounds during the ZIRP. Maybe some founders were smart enough to negotiate less stringent liquidation preferences, but I think the vast majority are sitting on worthless shares.

[@harrylee27]

Great topic, it's great to occasionally step back and observe the broader cosmic forces that influence us all, reminding us to stay grounded and focused on creating genuine value rather than getting caught up in valuation hype.

[@nicolasrada1325]

The other thing to talk about in b2c is how much money is spend by the average person on software vs other stuff. The numbers scream that software b2c IS WAY overrated

[@aybrl]

5:43 the 'YES' of Jian Yang from the silicon valley show 😂

[@GabrielSestrem]

They guys who made money where the ones who Exited their businesses during ZIRP

[@chan90s]

When he said revenue to valuation multiple, that's how public markets work

[@saske20001]

These two always got me laughing by myself in not normal-to-laugh places by yourself.

[@Yusuf-ok5rk]

today's talk is so goofy I love it

[@noahloyd9]

Hey @Ycombinator , I’m in the early steps in creating my startup and eventually applying to yc. Im in desperate need ,or more so curious, to know YC’s thoughts of creating a business plan for a startup. Im aware the likelihood for a pivot or change to happen is high but in my instance I feel as though creating a business plan could better outline my vision as well as gaining me , or increasing the probability, of early investments. Thank you (also loved the video on startup websites , would love similar more in depth/focused videos on the topic)

[@debrajoy108]

Really enjoyed this episode 👌✅

[@carlosg1535]

Very nice video: interesting topic and good vibes :-)

[@Sondre7]

Love listening to you two

[@DatNgo-uk4ft]

great commentary here

[@nsilou]

Dalton: why do people laugh when i speak? Michael: YES

[@alexeykardo1629]

So true ) we are doing more now with $15k/mo more than we did with twice as more, with higher automation and better software, instead of hiring 5 assistants like a big company. Thank you!

[@danielkopaee9241]

“Turns out money always has product market fit, especially cheap money”

[@gomini3707]

Recommended reading "What has government done to our money" by Murray Rothbard.

[@michaeljamescollins6800]

It’s zero interest rate policy

[@stephenhunter121]

Zero interest rate policy

[@ryanrhodescooking]

this is a funny one, love it.

[@ryanrhodescooking]

oh god it got funnier

[@Yusuf-ok5rk]

I just commented something similar lol

[@toreon1978]

1:38 you don’t have to shout out your missing knowledge that proudly.😂

[@chan90s]

I'm rejected by YC and now I want to start a VC fund 😂 0 management fee. The interest until deployment should take care of my expenses

[@juanfromporter2308]

It's platform risk-on the fed. Haha

[@kylefranklin151]

I self-finance periodically with ZAPR 12s and 18s... zero APR credit card promos for 12 or 18 months..... also not a good idea haha

[@AnomalyHQ]

A lot of people want this money thing 🤣

[@nonefvnfvnjnjnjevjenjvonej3384]

the corollary to this is now is actually a great time to start and build a business.

[@midiminion6580]

lol. Its crazy how everyone blames the lay offs on AI but it really is about money not being thrown into software money pits anymore

[@raymobula]

The time in the 2000’s when startups got money - and all of them bought that one type of “tech-bro” chair. 😂

[@george_davituri]

Takeaway from this episode, ZIRP means slow economic growth. YC can 'poison' us, they have infinite amount of it, can be useful if used wisely for business growth. Some business only worked when there was nowhere else to invest in the world, they are lucky to be funded but on the other hand it is sad that they didn't create stunning product or they dropped it.

[@ShaiAlon]

"Money has product market fit" 🤯

[@fayazmaihandost]

Can I get some those you got on the back my business really needs it 😂

[@grammar_shark]

You want poison?

[@machapuis]

I wish I tried to raise during ZIRP 😢

[@u2b83]

Giddy from the recent NQ moves lol If herstory repeats, we've got another 40%

[@darrellbrown3691]

I look forward to working with you guys; I'm optimistic but not overly optimistic... "Now, let's upcycle 500K homeless & poverty-stricken people!" ♡Darrell (Human-Upcycle)

[@matten_zero]

The sad thing is there were a bunch of smug dumbasses who thought because their dogwalking startup got VC money that they were some kind of smart person. So glad Powell is discplining the market right now and all these companies are finally going bust so that real businesses can thrive.

[@JoshvsData]

me no understand, gonna get back to coding now

[@TonyMandarano]

It’s Zero Interest Rate Policy. It’s not a phenomenon. It’s clear why it happens/happened.

[@HamounKarami-xe5zv]

sounds like tiger global....

[@ajayrathore7045]

❤

[@sergelioutyi]

There should be a separate YC channel just for you two… or even better your own Netflix show.

[@jjones0822]

Sounds like laundering

[@rcstann]

¹1¹st ! And ... we're at the gate . . .

[@cartoonking1063]

Are the two lads stoned? Spent the whole podcast giggling like little girls whenever the other finishes a sentence

[@amanciocohen5965]

Michael can you please stop fucking saying "Yes" whenever Dalton says anything?? It's like you are trying to assert your dominance over him. Let him say what he's saying without you feeling that you have to approve it all piece by piece.