How SaaS founders should think about inflation and personal investing

Executive overview

Inflation erodes cash and squeezes thin-margin businesses — but SaaS founders are largely insulated by 85–95% gross margins that can absorb cost increases other industries cannot.

The real decisions are personal: how to rebalance a portfolio when cash deflates, bonds underperform, and real assets hold value. Make adjustments gradually rather than trying to time the market.

High SaaS margins buy founders time that most business owners don't have — use it to rebalance calmly, not reactively.

Why SaaS is structurally protected from inflation

• Gross margins of 85–95% mean a 6% cost increase is absorbed without meaningful damage to profit
• No physical supply chain exposure — AWS price rises are trivial compared to shipping container costs hitting e-commerce or manufacturing
• B2B SaaS typically has pricing flexibility; a 5–10% price increase over a year is unlikely to move churn
• Most SaaS founders are underpricing already — inflation provides a legitimate prompt to raise rates

Personal portfolio moves worth considering

• Precious metals (physical or ETF): a small single-digit allocation as a portfolio diversifier that tends to rise with inflation
• Real assets (real estate, REITs, collectibles): conventional wisdom says these hedge inflation, though some data suggests real estate can lose value during inflationary periods
• Crypto: no historical inflation data, but directionally viewed as a plausible hedge; keep allocation small
• Bonds: perform poorly in inflationary environments; reducing bond exposure is worth evaluating, with timing informed by tax consequences
• Dividend and value stocks: outperform growth stocks during inflation because they generate current cash rather than betting on future earnings
• Growth stocks: priced on future earnings, which inflation discounts — these tend to sell off as money rotates to dividend payers

The fixed-rate debt advantage

• Borrowing at a fixed rate means repaying with progressively cheaper future dollars
• If inflation runs at 6% annually, the real cost of a 30-year mortgage payment shrinks every year
• Taking liquidity out of fully-owned real estate via a mortgage converts an illiquid asset into deployable capital

Cash and dry powder

• Holding excess cash during inflation means watching it deflate in real terms
• A practical emergency fund remains essential — but the target balance can be lower than in low-inflation periods
• Keeping some liquid reserve ("dry powder") enables opportunistic moves when markets dip — but the optimal amount is smaller now

On market timing

• Market timing requires being right twice: when you sell and when you buy back in
• Selling out of growth assets entirely to rotate into inflation hedges is a bet, not a strategy
• Gradual rebalancing — moving 2% at a time toward a target allocation — reduces regret risk without trying to call the market
• Dollar-cost averaging the transition applies as much to asset reallocation as to initial purchases

The three money skills

• Making money: salary, business revenue, exits
• Keeping money: avoiding destructive decisions (speculation, overspending, penny stocks)
• Growing money: deploying capital into diversified assets that preserve and compound real value