[HN Gopher] Launch HN: Palus Finance (YC W26): Better yields on ...
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Launch HN: Palus Finance (YC W26): Better yields on idle cash for
startups, SMBs
Hi HN! We're Sam and Michael from Palus Finance
(https://palus.finance). We're building a treasury management
platform for startups and SMBs to earn higher yields with a high-
yield bond portfolio. We were funded by YC for a consumer-focused
product for higher-yield savings. But when we joined YC and got our
funding, we realized we needed the product for our own startup's
cash reserves, and other startups in the batch started telling us
they wanted this too. We realized that traditional startup
treasury products do much the same thing: open a brokerage account,
sweep your cash into a money market fund (MMF), and charge a
management fee. No strategy involved. (There _is_ actually one
widely-advertised treasury product that differentiates on yield,
but instead of an MMF it uses a mutual fund where your principal is
at considerable risk - it had a 9% loss in 2022 that took years to
recover.) I come from a finance background, so this norm felt
weird to me. The typical startup cashflow pattern is a large
infusion from a raise covering 18-24 months of burn, drawn down
gradually. That's a lot of capital sitting idle for a long time,
where even a modest yield improvement compounds into real money.
MMFs are the lowest rung of what's available in fixed income. Yes,
they're very safe and liquid, but when you leave your whole
treasury in one, you're giving up yield to get same-day liquidity
on cash you won't touch for six months or more. Big companies have
treasury teams that actively manage their holdings and invest in a
range of safe assets to maximize yield. But those sophisticated
bond portfolios were just never made accessible to startups. That's
what we're building. Our bond portfolio holds short-duration
floating-rate agency mortgage-backed securities (MBS), which are an
ideal, safe, high-yielding asset for long-term startup cash
reserves under most circumstances.[1] The bond portfolio is
managed by Regan Capital, which runs MBSF, the largest floating-
rate agency MBS ETF in the country. Right now we're using MBSF to
generate yields for customers (you can see its historical returns,
including dividends, here:
https://totalrealreturns.com/n/USDOLLAR,MBSF). We're working with
Regan to set up a dedicated account with the same strategy, which
will let us reduce fees and give each startup direct ownership of
the underlying securities. All assets are held with an SEC-licensed
custodian. Based on historical returns, we target 4.5-5% returns
vs. roughly 3.5% from most money market funds.[2] Liquidity is
typically available in 1-2 business days. We will charge a flat
0.25% annual fee on AUM, compared to the 0.15-0.60%, depending on
balance, charged by other treasury providers. We think that
startup banking products themselves (Brex, Mercury, etc.) are
genuinely good at what they do: payments, payroll, card management.
The problem is the treasury product bundled with them, not the
bank. So rather than building another neobank, we built Palus to
connect to your existing bank account via Plaid. Our goal was to
create the simplest possible UX for this product: two buttons and a
giant number that goes up. See here:
https://www.youtube.com/watch?v=8Q_gwSqtnxM We are live with early
customers from within YC, and accepting new customers on a rolling
basis; you can sign up at https://palus.finance/. We'd love
feedback from founders who've thought about idle cash management or
people with a background in fixed-income and structured products.
Happy to go deep in the comments. [1] Agency MBS are pools of
residential mortgages guaranteed by federal government agencies
(Ginnie Mae, Fannie Mae, and Freddie Mac). It's a $9T market with
the same government backing and AAA/AA+ rating as the Treasuries in
a money market fund. No investor has ever lost money in agency MBS
due to borrower default. It's worth acknowledging that many people
associate "mortgage-backed securities" with the 2008 financial
crisis. But the assets that blew up in 2008 were private-label MBS,
bundles of risky subprime mortgages without federal guarantees.
Agency MBS holders suffered no credit losses during the crisis, and
post-2008 underwriting standards became even stricter. If anything,
2008 was evidence for the safety of agency MBS, not against it.
The agency guarantee eliminates credit risk. Our short-duration,
floating-rate strategy addresses the other main risk: price risk.
Fixed-rate bonds lose value when rates rise, but floating-rate
bonds reset their coupon based on the SOFR benchmark, protecting
against interest rate movements. [2] This comes from the
historical spread between MMFs and floating-rate agency MBS; MMFs
typically pay very close to SOFR, while the MBS pay SOFR + 1 to
1.5%. This means that if the Federal Reserve changes interest rates
and SOFR moves, both asset types will move by about the same
amount, and that 1-1.5% premium will remain. _This post is for
educational purposes only and does not constitute financial,
investment, or legal advice. Past performance does not guarantee
future results. Yields and spreads referenced are approximate and
based on historical data._
Author : sam_palus
Score : 57 points
Date : 2026-03-06 18:26 UTC (1 days ago)
| _hugerobots_ wrote:
| This would be a really nice product to start ups outside the US
| tech belt. Hubris of treading water in longterm a-series SUs
| elsewhere, this could be a viable solution if accessible.
| lowkey_ wrote:
| Not the OP but curious why you think so?
|
| If this gives an extra 1% per se, I imagine that is more worth
| it to a company fresh off a large fundraise with a ton of cash
| in the bank.
|
| Startups otherwise are lean and won't hold enough cash to get a
| meaningful return from the 1%.
| mushufasa wrote:
| I spent time looking into this a couple years ago as a startup
| founder with this problem. We are in the finance space so I saw
| how bad the treasury options were with our bank, given their fee
| cut versus plain T-bonds at the time. I looked into which
| brokerages allowed us to setup self-directed accounts (many banks
| don't offer that for businesses at all). I found the "correct"
| approach. But then there would be more paperwork and back and
| forth to set up that new account, then manage transferring money
| around when we needed it, logging into a different system. On a
| ski trip a friend in finance told me "you're being dumb, if your
| bank offers you a treasury plan with a one click button, even if
| it's not perfect, click that button now!" So I did.
|
| Then, the benefit of saving 1-2% extra versus spending my time
| trying to actually running the business and doing things with our
| money in the real world, has meant I have never looked back. 1-2%
| on millions of dollars is significant but it's not nearly as
| impactful as finding Product-Market-Fit in your actual business.
|
| All this to say: I'd be in your target market but I'm simply not
| interested in a "marginally better" treasury system versus just
| going with my bank's options that make it easy for me.
| Esophagus4 wrote:
| Similar to something like Jiko?
| sam_palus wrote:
| That's fair. But to your point, the problem we see is that
| banks' treasury products take advantage of founders who
| (rightfully) don't want to think about their treasury yields.
|
| That's why we designed Palus to be as simple as possible to
| use. If you check out our demo video, you'll see it's super
| straightforward. Setup takes <5 min and then you don't have to
| think about it anymore. We're also building out automatic sweep
| functionality, so then you REALLY won't have to think about it.
|
| Given the significant increase in returns on a large treasury,
| we think it's worth the small amount of effort.
| fakedang wrote:
| > Given the significant increase in returns on a large
| treasury, we think it's worth the small amount of effort.
|
| Isn't that the point he was making though? It's a large
| treasury in aggregate, which is why it makes sense for a new
| entrant to come in, but it's only a 1-2% problem for
| founders, which is why they don't bother with it much (why
| fix what's not broken, etc.).
|
| By the time founders raise significant sums of money (which
| is usually Series B onwards), they might be better suited to
| deal with a fractional CFO service which provides the full
| spectrum of services instead.
| sam_palus wrote:
| Even for a Series A company, putting $5M into Palus yields
| them an extra $50k-75k per year, just for letting their
| money sit in a smarter place. It's a five-minute
| optimization which essentially gets you half a junior
| engineer's annual salary for free.
| digitallogic wrote:
| > 1-2% on millions of dollars is significant but it's not
| nearly as impactful as finding Product-Market-Fit in your
| actual business.
|
| You've got really significant, broader lesson here for startups
| at this stage.
| sam_palus wrote:
| We totally agree! And that's why we specifically designed
| Palus to be as easy to use as possible. It's a one-time setup
| that takes five minutes. We optimized our UX for founders to
| spend as little time using it as possible, so they can focus
| on finding PMF instead.
|
| Even for a Series A company, putting $5M into Palus should
| yield an extra $50k-75k per year, just for having your money
| sit in a smarter place. Put another way, it should cover six
| months of a junior engineer's salary for free.
|
| For five minutes of setup, we think most founders will find
| it worthwhile.
| hahahacorn wrote:
| Is this available for Non Profits?
|
| I've had an easy time setting up treasury accounts with Rho &
| Mercury for 2 co's, but the latter gave me a no-go on an account
| for a non profit.
| sam_palus wrote:
| Yep! Fill out the signup on our website and we'll be in touch
| Lionga wrote:
| Any higher yield comes from higher risk. If any startup feels the
| startup is not risky enough and really wants to have higher yield
| for higher risk just put the money in a Bond ETF that suits your
| risk appetite. Crazy that YC funds things that make a simple
| thing more complex and more costly for zero upside.
| sam_palus wrote:
| The bond funds offered in existing startup treasury products
| aren't suited for startups' long-term cash reserves. They
| either offer low-yield money market funds, or bond funds that
| aren't well suited for capital preservation on the order of
| months the way startups operate (see here for an example of
| VFSTX, the fund offered by one of the leading startup treasury
| products today: https://totalrealreturns.com/n/USDOLLAR,VFSTX?s
| tart=2021-01-...)
|
| Our goal is to make sophisticated treasury management easy for
| startups. With Palus, they don't need to manage a brokerage
| account, or handle treasury ladders, or anything like that.
| TZubiri wrote:
| If the value proposition is better interest rates, it sounds like
| Palus would get that by giving up their cut, what would be your
| monetization strategy then?
| mogonzal wrote:
| Lucky for both of us, the value prop isn't just "we are
| offering better interest rates on the same instruments because
| we gave up our cut"
|
| It's actually "we found a way better set of instruments for
| long-term cash that allow us to offer better interest rates
| without giving up the cut altogether"
|
| That being said, we do think the current treasury products can
| be a little predatory with their rates. For example, Rho
| charges a variable rate that peaks at 0.6% for any deposit of
| $2M or less. We think that's crazy so our margin is a flat
| 0.25%, no asterisks or fine print.
| TZubiri wrote:
| As other users mentioned, that would probably raise concerns
| about risk. In terms of yields for startups I'm assuming we
| would be talking about zero risk assets, that is US treasury.
| But I'd be interested in learning about these alternative
| assets.
| mogonzal wrote:
| That's totally fair. Risk is 100% the right concern to have
| when you hear about higher yields
|
| We have a pretty comprehensive blog post about these assets
| (floating-rate agency MBS) and why we think they are a much
| better fit for startup treasuries. I encourage you (and
| anyone else reading this) to give it a read so that you
| understand exactly how they work and what the tradeoffs
| are: https://www.palus.finance/info/safety
|
| That said, we understand not everyone wants to spend their
| day reading our blog posts. So the best tl;dr we can give
| is that the higher yields do not come with a credit risk,
| but instead with 1-2 days of liquidity cost versus same-day
| for MMFs. Which is much more ideal for a startup's idle
| cash
| TZubiri wrote:
| Interesting, I think maybe an approach that would sell me
| more is actually leaning into the risk aspect a little
| bit. If you tell me that there is no beta increase, just
| pure alpha, alarms ring off, but if there is a slight
| beta with outsized alpha, then I think of it as a
| tradeoff that I am making, I am willing to take a little
| bit more risk for a higher return, which might in turn
| reduce longer term startup risks and allow me to increase
| my chances of winning by having an extra month or two of
| runway, now I'm comparing risks instead of thinking about
| just the risk you introduce.
|
| It helps that even if from Palus' perspective there is no
| increased beta risk compared to the market standard of
| treasury instruments, even if your thesis that the alpha
| comes from an inefficiency due to bad 2008 reputation, as
| a buyer there is still a non-systemic risk associated
| with going for a niche provider and trusting you.
|
| So when you consider that in the eyes of a buyer there's
| already a non-systemic risk inefficiencies based on lack
| of distributor trust, then it doesn't really make sense
| to keep systemic risk low, I think the play here would be
| to increase the systemic risk of the play to something
| manageable, since the customer is already paying a last-
| mile risk of trusting you as a distributor of the federal
| products.
|
| All of this might make it more tempting for clients to
| switch and choose you, otherwise if the choice is between
| 3.5% and 5%, it's not really a significant difference,
| however if the difference is 9% vs 3.5% and the risk is
| minimal, then maybe startups will bite, founders are
| already making wild bets, it isn't crazy to bet that
| there will not be a housing market crisis and that a
| provider won't scam you. If that happens tough luck, I
| guess.
|
| I would go even further and say that this bet could be
| tied into the vision or industry of the founder, for
| example if the founder thinks that things are basically
| the same as they always were and that AI won't change the
| market dynamics much, then that's not a strong sale
| because lightning may strike twice on the same spot.
|
| Or to put a simpler example, the industry itself might
| make it a good fit, if the industry is Real Estate that's
| the most obvious example, they are going bust anyways if
| there's a housing crisis. But if it's entertainment, or
| any other industry that depends on consumers having large
| discretionary income, they are probably going to fail
| anyways if there's a large consumer crisis.
|
| So yeah, tl;dr I think that the better play is to lean
| into the risk rather than trying to communicate that
| there is no risk.
| sam_palus wrote:
| I definitely see your point. Our thesis with the MBS
| product, in finance terms, is that most startups can
| afford to take on a bit more liquidity risk on their
| long-term cash (on the order of a couple of days) to get
| significantly better yields without taking on credit or
| price risk on their principal.
|
| We've had discussions about offering products in the
| future with higher yields that carry more risk. Most
| founders we've talked to are very risk-averse on their
| company treasury, but if our users tell us they want
| access to different instruments with different risk
| profiles, we're happy to meet them where they are.
| SigmundA wrote:
| Nice to have some higher yield options.
|
| There are banks out there that will do business savings accounts
| not much below this (2.85%) while keeping things safe (FDIC
| insured) and liquid.
|
| https://www.liveoak.bank/business-savings/
| sam_palus wrote:
| Good find- 2.85% is great for a business savings account.
|
| All that is to say: businesses shouldn't treat all their cash
| the same way, especially when they have significant runway. The
| exact breakdown depends on the business, but typically you can
| think of it as three different buckets:
|
| 1) You have short-term cash, which you need immediately. This
| is where you'd use a checking account. This pays very close to
| 0% but you have immediate access. Most businesses might keep a
| few weeks' cash here.
|
| 2) You have short-term reserves, which is what you'd use in the
| next couple of months. This is where most companies might use a
| savings account (or even put it in a money market fund), where
| you know you can get the cash into your checking account in ~1
| day. This pays between 2.5% and up to maybe 3.75%. Each
| business will structure their cash differently, and some might
| not even bother having this bucket.
|
| 3) Long term reserves, which you won't touch for months. This
| is where companies try to optimize yield, and where Palus is
| valuable. Even here, your money is safe, and in Palus's case
| can usually be in your checking account within a couple of
| days, but getting extra yield on long-term reserves can be
| super valuable.
| quickthrowman wrote:
| You're still exposing yourself to duration risk, right? What's
| the average duration of your short-term MBS portfolio?
|
| MBS bonds pay a risk premium for a reason, you're virtually free
| of credit risk, but you're assuming interest rate/duration risk
| (not particularly relevant if duration is low, I'm not familiar
| with the duration of short term floating rate MBSes)
|
| Also, what happens in a Silicon Valley bank type scenario, let's
| say you have lots of withdrawals and you have to liquidate at
| under face value. Who eats the loss?
| JackFr wrote:
| They said "short duration" not "short term". The real risk is
| from spread duration rather than simple interest rate duration,
| and assuming they don't lever up, that should be minimal.
|
| The beauty of MBS floaters is that you're relatively
| insensitive to prepayments because to a first approximation
| they're always priced at par.
|
| From an investor standpoint, as they say, you're making maybe
| SOFR + 1.5%. That's not a very sext return. But let's say your
| banks repo desk is willing to finance the purchase at 5% down.
| Then you can lever up your investment 20x and now you're a big
| shot making SOFR+30%, which is very sexy. But what's that, when
| your lever like that, a tiny decline in price wipes out your
| entire stake (Welcome to 2008).
| quickthrowman wrote:
| Thanks for the informative reply, that makes sense.
| sam_palus wrote:
| Very well put. And yes, to your point, we don't lever up.
|
| And yes, SOFR + 1.5% isn't very sexy, but we're competing
| against existing treasury product that use money market funds
| and pay SOFR (or less, after fees). So that 1.5% is
| meaningful.
| yarrowy wrote:
| What's the advantage of this versus opening a Fidelity account
| and buying the same product?
| mogonzal wrote:
| Super fair question haha. I'm gonna flip this question first
| because I think it perfectly frames the current landscape of
| startup/SMB treasury products
|
| Say you (like many startups) use Mercury Treasury, Rho
| Treasury, Brex Treasury, etc. Most of these list somewhere
| exactly what funds they buy into. Why not just open a fidelity
| account and by them yourself?
|
| The answer is pretty clearly ease of use. Easy to move money
| from your bank account (likely also with them) to their
| treasury, easy to set up rules like ("if my bank balance falls
| below $X then transfer $Y from treasury"), stuff like that
|
| We provide all of these features too! We are not at all asking
| people to bank with us or spend the time/friction of actively
| managing their deposits
|
| So if the ease-of-use is the same and the yields are roughly
| 40% more than the generic money market wrappers out there, we
| think it's a no-brainer
|
| (EDIT: adding mention that I am OP's co-founder)
| reenorap wrote:
| My read of this answer is "There really is no difference
| except you pay us 0.25% for 'ease of use'".
| mogonzal wrote:
| If this point is not getting across, my apologies for not
| being clearer: this product is for startups and SMBs that
| don't have the time or resources to host a fractional CFO
| or a full-time finance team. If you have the time to manage
| your own treasury as a founder, that's amazing and we
| really want to know your secret sauce!
|
| But for the majority of founders who want to spend their
| time building, the fee isn't for ease of use just as this
| "nice to have", it's for the outcome that ease of use
| delivers: no need to hire for treasury operations, no
| manual reconciliation between accounts, no time spent on
| stuff that isn't your product.
|
| We really think that in most cases, the tradeoff is worth
| it. But if it's not for you, we totally respect that too.
|
| Also want to note that most treasury products start their
| fees at 0.6%, which we agree is quite ridiculous hence why
| ours is less than half that.
| ElProlactin wrote:
| If you don't have the time or resources to have a finance
| resource is the extra 1% on treasury really important?
| collingreen wrote:
| Startup founder: at this point you need to overcome the stigma of
| fly by night fintech wrappers sitting on top of banking and the
| exceptional, outsized risk that creates for consumers a la
| synchrony and things like yotta essentially losing millions of
| customer money with no recourse because a discrepancy between
| those two layers. 1% higher yield is nowhere near juicy enough
| for me to literally bet the company on and that's close to what
| would happen if you lost my entire last round (or locked it up 6
| months beyond when I need it). Starting with yc companies as a
| trust indicator is helpful although yc switching to a shotgun
| "fund hundreds of companies per batch" approach means the yc
| label carries a LOT less weight than it used to (since they are
| no longer paying much attention to any one investment).
|
| I like smart finance plays and I hope you can do that and stand
| out from the glut of finance bros who have (and continue to)
| muddied the water (poisoned the well?) with this approach of
| "tech on top if actual finance companies".
|
| Good luck out there!
| sam_palus wrote:
| Fair! Growing user trust is definitely one of the biggest
| challenges building in this space.
|
| For what it's worth, we don't hold users' funds ourselves; we
| use an SEC-regulated custodian (Alpaca) with the assets legally
| held in your name. And we're working on building transparency
| measures, like detailed views into your account's specific
| holdings of underlying assets with verifiable attestations,
| third-party auditing, and frankly any other measures that our
| customers would want us to.
|
| I know putting company money into a new product requires a lot
| of trust. Like any product you're still exploring, I'd
| encourage you to start small, try us out, and grow your
| position over time as we earn your trust. And if it helps you
| trust us, I'd be happy to get on a Zoom call or meet IRL.
| uniclaude wrote:
| Far from me the idea of criticizing a founder starting something
| to help other startups. That's amazing. However, the post is not
| really accurate! Are you sure that all these MBS pools have the
| same government backing as Treasuries? Ginnie Mae, Fannie Mae,
| and Freddie Mac are not equal. Are the additional risks (spread
| risk, liquidity mismatch, and risks related to the mortgage
| structure that even Regan discloses!) worth the tiny extra yield
| above money market funds? Startups have to deal with uncertainty
| all the time, that's the nature of business. Principal loss, and
| liquidity issues are not things you should have to deal with as a
| startup. However, providing options to startups is always great,
| and I think this is a great direction!
|
| Again, I hope this doesn't come as negative, but I'm not sure
| this is making the risk clear. I am not sure I would suggest my
| portfolio companies to risk their treasuries unless I am sure
| they're fully understanding the risks associated. Do you intend
| to provide anything else?
| sam_palus wrote:
| These are good points.
|
| On the government backing: it's a fair nuance to point out. In
| a technical sense, Ginnie Mae has the explicit full faith and
| credit guarantee while Fannie/Freddie are GSEs with an implicit
| one (and are under government conservatorship). But in
| practice, the distinction isn't really meaningful. In practice,
| the federal government has always guaranteed these loans (even
| in 2008, when they were under the most stress they've ever
| been, and there have been significant reforms as a result).
| There's no reason to think they'll ever stop. The scenario
| where the GSE guarantee fails is essentially the collapse of
| the US economy well beyond anything we saw in 2008 (in which
| case frankly we all have much bigger problems).
|
| On the risks you mentioned: 1) Principal loss: given the
| guarantees re credit risk, and the fact that we use short-
| duration floating rate instruments to protect against price
| risk, this shouldn't really be a concern. 2) On spread risk:
| there can be slight variation in spread, mostly affecting
| yields; this is why we say "4.5-5%" yields given there's some
| variability in that range (but all far above money market). 3)
| On liquidity: agency MBS is the second most liquid fixed-income
| market in the world after Treasuries. In nearly all
| circumstances, liquidity is 1-2 business days. This product is
| really meant for long-term cash reserves; our idea is that
| companies should stop treating 6+ month cash the same as next
| month's payroll.
|
| Ultimately we encourage founders to do their own research and
| understand what they're doing with their money. We wouldn't ask
| anyone to put short-term cash in a MBS portfolio (in the future
| we'll probably offer some other options too). But for long-term
| cash they're sitting on, the extra yield can be meaningful to
| the business: on $5M, it's an extra $50k-75k per year, or half
| a junior engineer's salary. Given the minimal risk, I think
| it's worthwhile for a lot of companies.
| AlotOfReading wrote:
| You should write more pieces like this and display them more
| prominently than an HN thread.
|
| Your market is founders who have put money in an MMF and
| stopped thinking about it, not the people evaluating
| different optimization strategies day-to-day. So
| acknowledging the risks and saying "here's exactly when you
| should consider us" is exactly the kind of thing that helps
| overcome that uncertainty hurdle that results in choosing the
| simplest, safest option.
|
| Founders should obviously do their own research, but that's
| asking the customer to proactively expend effort digging
| through future marketing copy to evaluate _your_ product.
| They 're not realistically going to do that as well as they
| should and the people who don't need to probably aren't your
| target market.
| sam_palus wrote:
| Yeah that's a great point. We do have some pieces up
| already (https://www.palus.finance/info/safety) but plan on
| adding way more.
|
| Honestly this HN post has been really insightful in knowing
| what questions founders will want us to answer.
| andrewljohnson wrote:
| We use Mercury's treasury account to get yields on cash, and what
| appeals to me is it is easy to manage. I don't have to worry
| about setting up processes to move money around and it's
| integrated with my bank account, and we wouldn't want to switch
| even for a higher yield... the operational burden is more
| important to us than yield.
|
| I think the yield is about 3.2% based on how we set it up to be
| as liquid as possible. We could have accepted less liquidity for
| more like 3.8%
| mogonzal wrote:
| Hey Andrew thanks for the feedback
|
| We know that the main barrier to switching is just time and
| ease of use, so we deliberately built this to have the same
| operational burden as using your current treasury product
|
| Palus links straight to your bank account just like Mercury,
| and we'll also allow you to set up rules for moving money
| around!
|
| That said, if there's any other features that really keep
| people tied to their current products we want to know about it.
| Our goal here is to build something that actually cares about
| the fact that you're a startup with limited time to care about
| yields, and not just throw your money in a generic fund and
| forget you exist
| zie wrote:
| At .49% expense ratio, plus whatever your cut is, it won't be a
| very cheap product. Even SPAXX, the default holding of cash at
| Fidelity is cheaper at .42% ER.
|
| There is no free lunch in investing, so that extra yield comes
| with extra risk. Be that duration, credit, etc. That's not to say
| MBS's don't have their place, but I would never claim people's
| mortgages as equivalent to cash in any shape or form. Your
| website claims MBSF is safe for 3+ month durations, but that is
| not the avg duration of MBSF held securities, so you are
| encouraging duration risk.
|
| I haven't read the full prospectus on MBSF, so I'm not an expert
| on that product, but it seems expensive and complicated, which is
| not what you want for cash and cash-like things. This should be a
| hard pass for literally everyone.
|
| Meanwhile you can hold something like ICSH[0] or SGOV[1] with
| expense in the .09% or lower range(i.e. for every $10k we are
| talking $9/yr or less in fees). SGOV is 0-3 month max duration,
| so it's perfect for holdings in the 3 month time-frame. If you
| need longer time frames you can buy govt bond ladders in whatever
| time frame you want.
|
| What your product _should_ have been: You specify duration for
| each of your buckets, and then you pick appropriate, cheap index-
| based investments that are cheap and easy to reason about for
| each of the buckets.
|
| 0: https://www.ishares.com/us/products/258806/ishares-
| liquidity... 1:
| https://www.ishares.com/us/products/314116/ishares-0-3-month...
| sam_palus wrote:
| The 4.5-5% yields we quote are net of expense ratio. Then our
| cut is 0.25%, comparable to the 0.15% to 0.6% charged by
| Mercury, Rho, etc. And we're working on bringing that expense
| ratio down as we scale.
|
| Functionally speaking, short-duration floating-rate agency MBS
| trade at such a stable NAV that they're perfectly sufficient
| for long-term cash, and many large companies trade these.
|
| MBSF is complex in the way that basically any fund is complex,
| but the strategy it employs is actually quite simple since it
| only trades a single asset class. Yes the expense ratio is
| higher than some other funds but the additional yields more
| than make up for it.
|
| ICSH and SGOV are great funds too, and make sense for shorter-
| term cash, but they pay significantly less than we do.
|
| Broadly speaking, our product is meant for exactly the kind of
| cash strategy you're thinking about: multiple buckets with
| duration spread accordingly. At the moment, our platform is
| just for the long-term bucket. But in the future, we might add
| additional shorter-term buckets too (maybe even with ICSH or
| SGOV).
| I_am_tiberius wrote:
| Did YC finally stop investing in AI companies only?
| mogonzal wrote:
| Haha just wait until we add a chatbot in the corner of your
| window that's constantly pinging you to deposit more money
|
| Name suggestions are appreciated
| kjksf wrote:
| Anyone can buy STRC with 10-11% yield, paid monthly. Full
| liquidity (i.e. can sell anytime).
|
| 5% return is not competitive.
| sam_palus wrote:
| STRC has only been around for less than a year. I don't know
| too much about what assets it holds (and maybe it's worth me
| looking into it), but those kinds of returns are generally a
| sign that you're taking on a lot more risk than you think (even
| if it hasn't had a major price decrease yet).
|
| We're competing against long-term cash held in a money-market
| fund (an instrument optimized for short-term use with same-day
| liquidity) earning 3.5%. In that context our yields definitely
| are competitive.
| jdndbdjsj wrote:
| I googled it. That is Strategy? Ponzi Saylor's company. Ooook.
|
| Why not buy Celsius (1) instead, even better yields ;)
|
| (1) https://en.wikipedia.org/wiki/Celsius_Network
| verteu wrote:
| STRC is much riskier (I'm having trouble imagining any scenario
| where it does NOT default.)
| notpushkin wrote:
| Congrats on the launch!
|
| Do you work with non-US companies? I have a company in Estonia,
| and hold some reserve cash (mix of dollars and euro) on a Wise
| account. It pays 2.20% variable APR, but I'm starting to explore
| other options :-)
| sam_palus wrote:
| Thanks! Yes we do. Sign up or book a call on our site and let's
| discuss.
| kristianp wrote:
| > Agency MBS holders suffered no credit losses during the crisis,
| and post-2008 underwriting standards became even stricter.
|
| I suppose the Agency MBS holders still had losses during the GFC.
| Would your clients wear any losses in MBS price of there's
| another housing downtuurn or recession? Why not diversify into
| other bonds as well?
| d--b wrote:
| Dude, don't put safe and high-yielding next to each other. It
| makes your post look like a scam.
|
| 1% spread is in fact, pretty small, so yeah, it probably isn't
| very risky.
| mogonzal wrote:
| The reason for the current framing is that pretty much every
| founder we have spoken to hears "high yield" and then instantly
| asks about safety. But like you said, at this spread it isn't
| risky
|
| But yeah, any time you put those two words together it inspires
| skepticism, which is totally understandable. I think this comes
| down to a lack of education, most people think the only two
| dimensions in this space are yield vs risk when in reality
| there is a third one (liquidity) that is balancing out the
| spread
|
| Super open to suggestions for alternate framing. Maybe
| something like "optimizing" yields?
| d--b wrote:
| it's just that "high yield" refers to subprime crap. credit
| card-like rates of like 16%.
| tjpd wrote:
| Isn't the issue of products like this that they present PHC risk,
| jeopardize QSBS - particularly at the earliest stages where
| revenue is de minimis?
| sam_palus wrote:
| This is really only an issue for startups with effectively zero
| revenue.
|
| Your company gets classified as a PHC (and is subject to
| additional tax) if investment income, including interest, is
| more than 60% of its revenue. This isn't something most
| startups need to worry about if you have any revenue.
|
| QSBS is based on intent, if the IRS thinks more than 80% of
| your assets are used for investment purposes and not for
| actively running your business. Basically it's so people don't
| use a small business tax exemption as a loophole for their
| investments. But the IRS absolutely considers idle cash in your
| company treasury as part of running your business, or else any
| startup that's raised money and didn't immediately spend it all
| would be considered an "investment vehicle," which they
| obviously don't.
|
| Moreover, any of these potential issues would apply equally to
| a startup doing _anything_ with their treasury, including
| putting it in a money market fund as most startups do. So we
| 're not introducing any new tax risk. But of course, if any
| startup thinks these might be an issue for their business, they
| should talk to their tax advisor.
| tjpd wrote:
| Agree on getting tax advice. But because QSBS is such a gift
| to VCs I really don't want to jeopardize it particularly when
| a bunch of startups are raising $20m on $0 revenue, so the
| balance sheet is basically just cash. At ~5% that's $1M/yr of
| interest, which can easily be the only income the company
| has. If that cash is sitting in an investment portfolio
| instead of boring cash equivalents, it feels like you could
| start getting into weird territory with the 80% active
| business asset test. The probability is Low but the impact
| for us is massive.
| sam_palus wrote:
| Agreed, QSBS is too valuable to be cavalier about.
|
| The active business asset test is about "intent and
| substance" and not balance sheet line items. I think it's
| very clear in this case that you'd be using it as a cash
| equivalent, since floating-rate agency MBS have a
| comparable risk profile to money market holdings (short
| duration, government-backed, highly liquid). And
| economically they're serving the same function: parking
| working capital safely until your business needs it. And
| frankly, I think accessing those assets through a treasury
| management platform, rather than a brokerage account, helps
| establish intent and substance.
|
| That's my view on it at least, and I know many companies
| use these assets for long-term cash without issue. But I'm
| not a tax expert.
|
| I do really appreciate you bringing this up though, and
| I'll reach out to our tax lawyer to get a proper written
| opinion we can share with our customers. Of course it's not
| a replacement for getting your own tax advice, but I think
| it'll be helpful regardless.
| jdndbdjsj wrote:
| Good luck! Not being startupy or American I don't understand. But
| sounds like a schlep problem (see pg essays).
|
| If you ever want to pivot an idea I am suprised no one does is
| why don't long term bets e.g. 2028 president pay interest. When
| you bet on something almost certain in 5 years you always lose
| due to lost interest. Maybe bets can include interest or even be
| chucked in SP500 for duration.
| mogonzal wrote:
| Tons of schlep blindness here for sure. That's the only
| plausible explanation for why existing treasury products have
| made it this far
|
| I'd say your long-term bets _are_ earning interest... it 's
| just going to the house and not to you
| ac29 wrote:
| > If you ever want to pivot an idea I am suprised no one does
| is why don't long term bets e.g. 2028 president pay interest.
|
| Kalshi pays interest on bets
| amluto wrote:
| Is the income generated exempt from state taxes?
| mogonzal wrote:
| No haha they are not exempt. But neither are money market
| funds, which are currently the most popular choice for startups
| and SMBs
| reenorap wrote:
| US treasuries are exempt from state tax but you didn't
| mention them. And Municipal bonds have no taxes but a lower
| rate.
| sam_palus wrote:
| To add more context: yes, US Treasuries are exempt from
| state tax, and municipal bonds are tax exempt too. It's
| pretty rare for startups to hold them directly; they
| usually hold money market funds. It varies between
| different MMFs, but they can be _partially_ state tax-
| exempt depending on what percentage of the underlying
| assets are federal bonds.[1] For instance, Vanguard shows
| you how much of each of their funds is tax-exempt here: htt
| ps://investor.vanguard.com/content/dam/retail/publicsite/..
| .
|
| However, this tax exemption is usually priced in: muni bond
| funds, and MMFs that hold lots of tax-exempt assets, tend
| to return less than funds which are not tax exempt. For the
| majority of startups that operate at a net loss, tax-exempt
| funds are probably a _bad_ choice, since you 're earning
| less yield and the tax exemption likely doesn't affect you.
|
| [1] The rules around this also varies from state to state;
| for instance, in CA, CT, and NY, you can only get _any_ tax
| exemption if a fund is at least 50% tax-exempt in each
| quarter of a given year.
| random3 wrote:
| Good luck! Fintechs targeting SMBs is a go-to-market strategy
| template that makes sense until you go to market and realize that
| if you have a better product, there's a better, bigger market and
| that market is the mid-market...
|
| The thing with startups, like with SMBs is that most times are
| fragile, not-financially sound institutions. At least for
| startups, those that don't die, usually grow and need the larger
| scale features anyways.
| sam_palus wrote:
| Thanks! In general we optimize for simple UX and would rather
| connect to your banking app than replace it. That does help
| keep feature demand down. But our goal is to grow along with
| our customers, communicate closely with them, and add the
| features they need as they scale.
| TZubiri wrote:
| You can probably go the other way and target consumers no? Or
| are they not equidistant?
| random3 wrote:
| Consumers are usually a whole different beast. Everything is
| different with consumers from sales and marketing to
| regulation, particularly in the financial sector. I don't see
| how it could be a natural move, especially not with a
| treasury product.
|
| There are exceptions, though, like Mercury, which expanded to
| consumers after having success with their business banking
| product.
| alansaber wrote:
| Definitely relatable across many markets
| vicchenai wrote:
| We kept all our post-seed cash in a basic MMF for like a year
| before realizing how much yield we were leaving on the table.
| Honestly the hardest part wasn't finding better options, it was
| convincing our board that slightly less liquid != risky. Curious
| how you handle the liquidity communication with founders who
| might need to pull funds on short notice.
| sam_palus wrote:
| We're up-front with founders that Palus is meant for longer-
| term cash, not money you'll need on short notice. Even then,
| our liquidity timeframe is typically 1-2 days.
|
| I'm curious about your experience dealing with your board. We
| haven't heard that issue from our customers yet, but thus far
| we mostly just target up to Series B (mainly since, once
| companies are taking venture debt, they're typically required
| to hold their money at specific banks).
|
| What were you trying to invest in, and what did they push back
| on?
| sebmellen wrote:
| How do you compare to a group like https://crescent.finance?
| Disclosure: I am an investor in Crescent, but primarily I'm just
| curious!
| sam_palus wrote:
| Do you mean this Crescent? https://www.getcrescent.com/
|
| They're more of a traditional banking product. They seem to
| have a great high-yield checking account (3%), which is a great
| place to keep short-term cash. But for long-term holdings that
| you won't touch for months, a higher-yield product like Palus
| makes more sense, earning closer to 5%.
|
| For what it's worth, we don't try to replace products like
| Crescent (or Mercury, Brex, etc.) at all. They're great for
| day-to-day banking. Instead we connect to your account there
| and optimize for really simple UX. We're working on setting up
| automatic sweep to/from Palus to make it even simpler.
| blainehoyt wrote:
| I like that your app is simple (a number that goes up). It would
| be cool for you to put this directly on your home page for
| potential customers to plug their number in and see the rate in
| which it goes up. I had Claude mock it up here [1]
|
| [1]
| https://claude.ai/artifacts/32bf6312-22b2-4d34-9840-bf33718f...
| jgelsey wrote:
| Not publicly accessible, could you fix permissions?
| blainehoyt wrote:
| apologies... I tossed it up on CodeSandbox:
| https://gpmyzr.csb.app/
| sethherr wrote:
| I've wanted this produce for years. Signed up. Thank you.
| pfannkuchen wrote:
| Juvenile concern: Your name is an extremely short edit distance
| from the word phallus [1] and essentially it is "phallus" but it
| starts with a different sound. Or I guess you could say it rhymes
| except for the first sound, which put that way doesn't sound as
| dramatic, but the words rhyme across multiple syllables and for a
| majority of the word, which again does sound somewhat dramatic.
|
| Does this simply not matter? I assume someone noticed this at
| some point during the naming process and it was set aside as an
| impractical concern.
|
| Anecdotally, it seems like most companies try to avoid such
| names. For example I can't think of any company names that end in
| "agina", with the notable _near_ exception of Orangina, which I
| think actually comes from it being a brand name from outside the
| Anglo sphere so they didn't choose that name in English going in.
|
| So is this like naming a company Pagina? Lagina? Bagina? Dagina?
| Zagina? Or, since it is a secondary word perhaps more like Fabia,
| or Tabia? Which doesn't actually sound too weird, though that
| other secondary anatomy word is not used nearly as often, whereas
| for example "phallus like object" is a household phrase.
|
| Can someone comment? My curiosity is... aroused.
|
| [1] https://en.wikipedia.org/wiki/Phallus
| ftchd wrote:
| It's because your cash grows, makes sense to me.
| pfannkuchen wrote:
| That's fair, though having your investments go limp in old
| age is less than ideal.
| masfuerte wrote:
| Orangina doesn't have that association because it's pronounced
| O-ran-gee-na. In the UK anyway.
| petesergeant wrote:
| It seems odd that the startup is getting the yield here, not the
| investors
| jimnotgym wrote:
| Just writing this for normal business people who don't have time
| or space to understand risk in money markets...
|
| If you have a surplus of cash you won't need for a few months,
| ask your bank manager for rates on a 30 day deposit account. You
| might be suprised how much better that is than doing nothing, for
| little risk or time. The last one I set up was done via email
| with the relationship manager, it appeared in my online banking
| the next day.
|
| Now decide if your time is better spent developing your business
| or understanding money market risk
| naturalauction wrote:
| In my mind, the ideal product would be an account that invest
| 100% of my assets in funds of my choice - and has immediate
| liquidity.
|
| One solution could let me withdraw immediately but and
| retroactively deducts the last few days of returns (or target a
| withdrawal fee equivalent to said returns).
|
| Do you know if there's a regulatory reason this product doesn't
| exist?
| sam_palus wrote:
| This is actually something we've done quite a bit of research
| into developing! What you're describing is very similar to repo
| lending in institutional finance.
|
| We ultimately decided against implementing it for our initial
| product, since we're specifically focused on companies' long-
| term cash reserves which by definition shouldn't require
| immediate liquidity. But in the future, if our customers want
| it, it's definitely something we can build.
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