Treasury 101: where startups should keep idle cash

After a funding round, most startups have more cash than they need for the next few months. Leaving all of it in a checking account feels safe, but it quietly costs money: inflation erodes it, and you miss out on yield that is available with very little risk. This guide explains the options, the trade-offs and a simple framework for deciding where each dollar should live.

Start with three buckets

Before choosing any product, split your cash by when you’ll need it.

1. Operating cash. What you need for the next two to three months of payroll, vendors and rent. This stays in your operating account, fully liquid.

2. Reserve cash. The next six to twelve months of runway. You won’t touch it often, but it must be available within a day or two.

3. Strategic cash. Anything beyond twelve months. This is where you can accept slightly longer access times in exchange for better yield.

The main options

Bank deposits

Simple and familiar, but deposit insurance limits are low compared with a typical funding round, and the interest offered on business checking is often close to zero. Spreading deposits across many banks helps with insurance but adds overhead.

Government money market funds

These funds hold short-term government debt and repurchase agreements. They aim to keep a stable value per share, offer same-day or next-day liquidity and typically pay close to the short-term interest rate. For most startups they are the default home for reserve cash.

US Treasury bills

T-bills are short-term debt issued by the US government, with maturities from four weeks to a year. They are considered among the safest assets in the world. Holding a ladder of bills that mature at different times gives you predictable access to cash and a yield locked in at purchase.

Things to avoid

Anything that promises high yield on cash should be read carefully. Corporate debt, crypto yield products and long-dated bonds can lose value when you need to sell. The goal of treasury at a startup is not to make money. It is to avoid losing it while earning a fair return.

Questions to ask any provider

• Who holds the underlying assets, and are they held in my company’s name?

• How quickly can I withdraw, and are there any fees or penalties?

• What exactly am I invested in, and how often can I see the holdings?

• What happens to my assets if the provider goes out of business?

Putting it into practice

A sensible starting point for a company with eighteen months of runway might look like this: three months in the operating account, nine months in a government money market fund and the remaining six months in a ladder of T-bills maturing every few weeks. Review the split every quarter, or whenever your burn rate changes.

Saro Treasury follows this structure. You choose a target balance for your operating account, and anything above it sweeps into a portfolio of Treasury bills and government money market funds that currently earns up to 4.2%. Withdrawals arrive by the next business day, with no lockups and no penalties.

“Treasury isn’t about squeezing out the last basis point. It’s about knowing exactly where every dollar is, and being able to get it back when you need it.”