Educational only — not investment, legal or tax advice.

On 16 September 2026 the Federal Reserve raised its benchmark rate by a quarter point, to a target range of 3.75% to 4%. The vote was 12-0. According to CNBC, it was the Fed’s first increase since 2023, and the officials’ projections showed 16 of 18 participants expecting another hike. The Fed’s statement pointed to inflation that remains elevated and said the move was meant to support “a timelier return” to its 2% goal.

If you are raising in the next 12 months, here is how that decision reaches you.

How rates reach startup valuations

1. Safe money pays more. When government bonds and cash pay more, every riskier investment has to promise a higher return to compete. Startups are at the far end of the risk curve, so the return investors demand from them rises too.

2. Future profits are worth less today. Startup valuations are mostly a bet on profits many years out. Higher rates mean those future profits are discounted more heavily, which pushes valuations down. Public growth stocks usually feel this first, and private rounds follow, because late-stage investors price against public comparables.

3. Fund managers raise money more slowly. The pension funds and endowments that invest in venture funds can earn more elsewhere. That can slow new fund formation, which eventually means fewer dollars for startups.

4. Debt gets more expensive. Venture debt and revenue-based financing are priced off market rates. A higher base rate means higher interest on any loan you take.

But money is still flowing, mostly to AI

Rates are rising into a market that is, by dollar volume, at a record. Crunchbase counted $510 billion of global venture funding in the first half of 2026, the most for any half-year on record, and reported that more than 70% of global startup capital in the second quarter went to AI-focused companies. The picture for a typical founder is more mixed than the headline: when a large share of money goes to a small number of very large AI rounds, everyone else competes for the rest.

What to do now

1. Extend runway before you need to. Cut or delay spending that doesn’t move your next-round milestones. Aim to have 18 to 24 months of runway when you start raising.
2. Lead with efficiency. In a higher-rate market, investors look harder at burn multiple and the path to profitability. Have those numbers ready.
3. Don’t wait for a better term sheet. If you have terms you can live with, the risk is that conditions tighten further while you shop.
4. Price debt honestly. If you use venture debt, model the cost at today’s rates and in a scenario where they rise again.
5. Watch the next decisions. The Fed meets several more times before year-end; each decision can shift how investors price risk.

From the investor’s side of the table

Having worked with funds and on rounds across Europe, Latin America and the US, I see the same pattern whenever rates move: investors don’t stop investing, they get more selective. The companies that keep raising are the ones that can show clearly how each dollar turns into progress.

The short version

Higher rates make investors more demanding, not absent. Raise from strength: more runway, tighter numbers, and a decision made quickly when a good term sheet arrives.

Sources

• Federal Reserve: FOMC statement, 16 September 2026
• CNBC: Fed approves interest rate hike, signals one more to come this year (16 Sep 2026)
• Crunchbase News: Global startup investment hit record $510B in H1 2026 (2 Jul 2026)

Written by Fabian Cisneros. Educational only — not investment, legal or tax advice. See the full disclaimer.