Launch HN: Palus Finance (YC W26): Better yields on idle cash for startups, SMBs

Introduction to Palus Finance

As a startup founder, managing your company's cash reserves is a critical aspect of ensuring financial stability and growth. However, traditional treasury management products often fall short, leaving startups with idle cash that could be earning higher yields. This is where Palus Finance comes in – a treasury management platform designed to help startups and small to medium-sized businesses (SMBs) earn better yields on their idle cash.

Why this matters

The typical startup cash flow pattern involves a large infusion of capital from a raise, which covers 18-24 months of burn. This means that a significant amount of capital is sitting idle for an extended period. Even a modest yield improvement can compound into real money over time. However, traditional treasury products often rely on money market funds (MMFs), which are the lowest rung of fixed-income assets. MMFs are very safe and liquid, but they offer lower yields compared to other assets.

How Palus Finance works

Palus Finance offers a bond portfolio that holds short-duration floating-rate agency mortgage-backed securities (MBS). These assets are an ideal, safe, and high-yielding option for long-term startup cash reserves. The bond portfolio is managed by Regan Capital, which runs the largest floating-rate agency MBS ETF in the country. This partnership allows Palus Finance to offer a dedicated account with the same strategy, reducing fees and providing each startup with direct ownership of the underlying securities.

Features and benefits

Some key features and benefits of Palus Finance include:

• Higher yields: Palus Finance targets 4.5-5% returns, compared to roughly 3.5% from most money market funds.
• Low fees: A flat 0.25% annual fee on assets under management (AUM), compared to 0.15-0.60% charged by other treasury providers.
• Liquidity: Typically available in 1-2 business days.
• Simple UX: Connects to your existing bank account via Plaid, with a simple two-button interface.

The safety of agency MBS

It's worth noting that many people associate mortgage-backed securities with the 2008 financial crisis. However, the assets that blew up in 2008 were private-label MBS, which are different from the agency MBS used by Palus Finance. Agency MBS are pools of residential mortgages guaranteed by federal government agencies, such as Ginnie Mae, Fannie Mae, and Freddie Mac. These assets have 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.

Example code snippet

While Palus Finance doesn't require any coding, here's an example of how you might calculate the potential yield difference between Palus Finance and a traditional MMF:

# Define variables
palus_yield = 0.045  # 4.5% yield
mmf_yield = 0.035  # 3.5% yield
principal = 1000000  # $1,000,000 principal

# Calculate yield difference
yield_difference = (palus_yield - mmf_yield) * principal
print(f"Potential yield difference: ${yield_difference:.2f}")

This code snippet demonstrates how to calculate the potential yield difference between Palus Finance and a traditional MMF.

Who is this for?

Palus Finance is designed for startup founders and SMB owners who want to earn higher yields on their idle cash. If you're looking for a simple, low-fee, and high-yielding treasury management solution, Palus Finance may be worth considering. With its focus on safety, liquidity, and ease of use, Palus Finance is an attractive option for companies looking to optimize their cash reserves.

So, what do you think? Are you currently using a traditional treasury management product, and are you interested in exploring alternative options like Palus Finance? Share your thoughts and experiences in the comments below!