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As an individual, you have much lesser money to spread around than a company. If a company with 25+ million in cash has to manage more than 100 accounts, they a
by tsycho 4y ago
As an individual, you have much lesser money to spread around than a company. If a company with 25+ million in cash has to manage more than 100 accounts, they are more likely to make some other banking mistake and lose some of that money through some administrative mistake.
That said, I sympathize with your broader point. With hindsight, it would make more sense for a company to have a brokerage account, and do something like invest their cash 1/3 each in 1-month/2-month/3-months Treasuries, rolling over every month.[1]
But most tech CEOs/founders of tiny startups probably don't know much about finance, and I can't really blame them for just putting their cash in a large bank.
[1] There's a startup opportunity to build this product right now, a pure custodian-style cash-management "bank" for small companies.
- hn_throwaway_99 4y ago> If a company with 25+ million in cash has to manage more than 100 accounts These products already exist. That is why I mentioned IntraFi (https://www.intrafinetworkdeposits.com/ https://www.intrafinetworkdeposits.com/) and MaxSafe (https://www.wintrust.com/maxsafe.html https://www.wintrust.com/maxsafe.html). There are standard cash management accounts, https://www.moneycrashers.com/cash-management-account/ https://www.moneycrashers.com/cash-management-account/. > But most tech CEOs/founders of tiny startups probably don't know much about finance, and I can't really blame them for just putting their cash in a large bank. Completely agree. But this is exactly the type of area VCs should be there to assist with, even if just purely for self interest. > There's a startup opportunity to build this product right now, a pure custodian-style cash-management "bank" for small companies. Again, these already exist, and are literally called "cash management accounts". Also, though, it wasn't just SMBs. Roku had nearly $500 million, a quarter of their cash, in a plain old SVB bank account!! Why they wouldn't put more of their money in 3 month TBills earning nearly 5% is beyond me.