Palus Finance Launches to Optimize Startup Treasury with MBS Yields

The launch of Palus Finance marks a significant shift in how early-stage companies manage their capital reserves. Historically, the 'startup treasury' model has been dominated by a few major players like Brex and Mercury, which typically offer automated sweeps into money market funds (MMFs). While MMFs provide high liquidity and safety, they often leave significant yield on the table—a critical oversight for startups that have recently raised large rounds and are sitting on 18 to 24 months of runway. Palus Finance enters the market with the thesis that this idle capital should be treated with the same sophistication as a Fortune 500 treasury, rather than being parked in the lowest-yielding fixed-income instruments available.

Founded by Sam and Michael during the Y Combinator Winter 2026 batch, Palus Finance underwent a pivot from a consumer-focused high-yield savings product to a B2B treasury solution. The founders realized that their own startup’s cash reserves, along with those of their peers, were being underutilized. The core of their offering is a shift away from the standard MMF sweep toward a managed portfolio of short-duration floating-rate agency mortgage-backed securities (MBS). This specific asset class is designed to provide a higher yield than traditional cash equivalents while maintaining a lower risk profile than the high-yield mutual funds that have occasionally caused volatility in the startup sector. Specifically, the founders pointed to a competitor's product that suffered a 9% loss in 2022, emphasizing that Palus seeks to avoid such pitfalls by focusing on agency-backed assets.

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For a startup with $10 million in the bank, a 1% improvement in yield represents $100,000 in additional annual runway—potentially enough to fund an additional engineer or extend the time to the next milestone by several weeks.

To manage this sophisticated strategy, Palus has partnered with Regan Capital, an investment firm that manages MBSF, currently the largest floating-rate agency MBS ETF. This partnership provides Palus with institutional-grade investment management that was previously inaccessible to smaller companies. By leveraging floating-rate securities, the platform is also positioned to perform well in fluctuating interest rate environments, as the coupons on these bonds adjust periodically, protecting the principal from the price drops typically associated with rising rates in fixed-rate bond portfolios.