What is ZIRP, and how did it impact the startup world?

by Dalton Caldwell6/20/2024

If you’ve spent any time on the startup side of Twitter, you’ve probably seen the word “ZIRP” thrown around. Usually not in a positive way; often as a jab. But what is ZIRP?

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.  These banks want to find somewhere for this money to go — so it can, in turn, make them more money. For a few recent years, that meant a lot of new cash rushing into VC and startups.

A rush of money for startups might sound like a good thing, but it’s never that simple. Handled incorrectly, too much money can be poison.

In this episode of Dalton + Michael, we’ll talk about some of the downstream side effects we saw during this stretch: 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. Michael and I aren’t economists, but we’ve seen some stuff; join us as we look back at how it all played out.


  • Dalton Caldwell

    Dalton is Managing Director, Architect and Group Partner at YC. He was the cofounder and CEO of imeem (acquired by MySpace in 2009), and the cofounder and CEO of App.net.