- 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.
by blainehoyt
1 subcomments
- 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...
- 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?
by quickthrowman
1 subcomments
- 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?
by vicchenai
1 subcomments
- 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.
- What's the advantage of this versus opening a Fidelity account and buying the same product?
- I’ve wanted this produce for years. Signed up. Thank you.
by sebmellen
1 subcomments
- How do you compare to a group like https://crescent.finance? Disclosure: I am an investor in Crescent, but primarily I’m just curious!
by mushufasa
2 subcomments
- 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.
by collingreen
1 subcomments
- 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!
- 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/
by notpushkin
1 subcomments
- 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 :-)
by kristianp
1 subcomments
- > 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?
by jdndbdjsj
1 subcomments
- 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.
by uniclaude
1 subcomments
- 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?
- 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...
by _hugerobots_
1 subcomments
- 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.
by hahahacorn
1 subcomments
- 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.
- Is the income generated exempt from state taxes?
- Anyone can buy STRC with 10-11% yield, paid monthly. Full liquidity (i.e. can sell anytime).
5% return is not competitive.
by andrewljohnson
1 subcomments
- 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%
- 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.
- 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?
- 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.
by I_am_tiberius
1 subcomments
- Did YC finally stop investing in AI companies only?
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