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

Source: Hacker News

Overview

We’re Sam and Michael from Palus Finance (https://palus.finance). Our mission is to give startups and SMBs a treasury‑management platform that earns higher yields by investing idle cash in a high‑yield bond portfolio.

The Problem with Traditional Treasury Products

Typical startup treasury solutions simply open a brokerage account, sweep cash into a money‑market fund (MMF), and charge a management fee—no active strategy. One widely advertised product tries to differentiate on yield by using a mutual fund instead of an MMF, but that approach exposes the principal to considerable risk (it suffered a 9 % loss in 2022 that took years to recover).

Startups usually receive a large cash infusion that covers 18–24 months of burn, then draw it down gradually. This leaves a lot of capital idle for months, and even modest yield improvements can compound into significant real money.

MMFs sit at the lowest rung of fixed‑income options: they are safe and liquid, but placing an entire treasury in an MMF sacrifices yield for same‑day liquidity on cash that won’t be touched for six months or more.

Our Solution

We build a sophisticated bond portfolio that was previously only accessible to large corporations with dedicated treasury teams. The portfolio holds short‑duration floating‑rate agency mortgage‑backed securities (MBS)—a safe, high‑yielding asset class for long‑term startup cash reserves.¹

The portfolio is managed by Regan Capital, which runs MBSF, the largest floating‑rate agency MBS ETF in the United States. We currently use MBSF to generate yields for customers (historical returns, including dividends, are available here: https://totalrealreturns.com/n/USDOLLAR,MBSF). In partnership with Regan, we are setting up a dedicated account that will reduce fees and give each startup direct ownership of the underlying securities. All assets are held with an SEC‑licensed custodian.

Target Returns & Fees

• Target return: 4.5 %–5 % annually (based on historical spreads) vs. roughly 3.5 % from most MMFs.²
• Liquidity: Typically available within 1–2 business days.
• Fee: Flat 0.25 % annual fee on assets under management (AUM), compared to the 0.15 %–0.60 % range charged by other treasury providers.

Integration & User Experience

We view banking products (Brex, Mercury, etc.) as strong at payments, payroll, and card management. The treasury component bundled with them is where the gap lies, not the banks themselves. Therefore, Palus connects to existing bank accounts via Plaid rather than building a new neobank.

Our UX is intentionally minimal: two buttons and a large, constantly updating number. A demo video is available here: https://www.youtube.com/watch?v=8Q_gwSqtnxM.

Current Status

We are live with early customers from within Y Combinator and are accepting new customers on a rolling basis. Sign‑up is open at https://palus.finance/.

We welcome feedback from founders who have considered idle‑cash management and from anyone with a background in fixed‑income or structured products. Feel free to dive deeper in the comments.

Disclosures

• 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.

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Footnotes

1. Agency MBS are pools of residential mortgages guaranteed by federal government agencies (Ginnie Mae, Fannie Mae, and Freddie Mac). The market totals about $9 trillion and carries the same government backing and AAA/AA+ rating as Treasury securities in a money‑market fund. No investor has ever lost money in agency MBS due to borrower default.

   While “mortgage‑backed securities” are often associated with the 2008 financial crisis, that crisis involved 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 stricter. The agency guarantee eliminates credit risk. Our short‑duration, floating‑rate strategy mitigates price risk: floating‑rate bonds reset their coupon based on the SOFR benchmark, protecting against interest‑rate movements. ↩

2. The target return derives from the historical spread between MMFs (which typically pay close to SOFR) and floating‑rate agency MBS (which pay SOFR + 1 % to 1.5 %). When the Federal Reserve changes rates and SOFR moves, both asset types move similarly, preserving the 1–1.5 % premium. ↩