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# Treasury Management

## Rules of Thumb

- **Operating Cash**: Maintain 90 days of operating cash in at least 2 banks including a systemically important bank (SIB) at all times; this is capital used for payroll, vendors, etc.
- **Near-term Cash:** Additional near-term operating cash (~6-12 months) held across two
two incremental banks. This cash should be held in liquid accounts: (interest-bearing)
savings/checking, money market, or insured cash sweep (ICS) accounts.
- **Additional Cash:** Any cash in excess of the above (i.e., cash not needed in the next ~12+
months) can be invested for yield. In a company’s early stages, this will be in similar safe
and yield-bearing accounts (money market, ICS, or treasuries).

## Offchain

Early stage companies often tend to use Mercury and/or Brex for banking and treasury management as a way to easily diversify.

It’s worth noting that both companies use an **insured cash sweep model:** model that federates deposits across multiple FDIC-insured bank accounts, in order to both insure your deposits while also giving you the opportunity to earn yield. Note that the pros of ICS products are to fully insure your deposit; while the risk is that, should an operating issue affect your primary bank, you may struggle to access the federated cash when you need it the most.

*Product information as of: March 2023*

### Mercury
**Product: Mercury Vault**
Funds in Mercury Vault accounts can be allocated across two sub-products with a custom allocation distribution.

#### Option 1: FDIC-insured checking & savings
Spread across multiple FDIC-insured program banks with an FDIC-insured offering that stacks customer deposits across 10 banks (each in $250,000 increments).

**Insurance**
Up to $3M in FDIC insurance across 12 banks

**Partner Banks**
Mercury works with Choice Financial Group and Evolve Bank & Trust to sweep assets across a list of FDIC-insured accounts.

#### Option 2: Mercury Treasury

**Insurance**
Treasury account has $500,000 in SIPC insurance.

Partner Financial Institutions
Mercury Treasury accounts are held in an account in your name at Apex Clearing Corp, a FINRA-regulated broker-dealer. APEX is prohibited from using customer funds or securities for its purposes or even from commingling those funds/securities with its own.

APEX redirects yield through Morgan Stanley and Vanguard mutual funds. Currently, only the Vanguard Treasury Money Market Fund generates yield.

Portfolio Breakdown
Vanguard Treasury Money Market Fund must invest at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).

### Brex

**Product:** Brex Business Account
Funds in Brex business accounts can be allocated across two sub-products with a custom allocation distribution.

#### Option 1: FDIC-insured checking & savings
Spread across multiple FDIC-insured program banks with an FDIC-insured offering that stacks customer deposits across 10 banks (each in $250,000 increments)

**Insurance**
$2.25M of FDIC-insured coverage across 9 banks

#### Option 2: MMF Administered by BNY Mellon
Funds in Brex Business Accounts can also be swept into a money-market mutual fund administered by Bank of New York Mellon ($400B+ bank, AAA-Rated Fund) called Dreyfus Government Cash Management. The fund seeks to invest in securities with minimal credit risk based on BNY Mellon Investment Adviser's assessment of the issuer's or guarantor's credit quality and capacity to meet its financial obligation.

**Insurance**
SIPC currently protects the assets in each account at Brex Treasury up to $500,000 (including $250,000 for claims for cash).

Portfolio Breakdown
79.35% - Repurchase Agreements
10.46% - U.S.Treasury
10.19% - U.S. Government Agency Debt

## Disclaimer
*This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment or legal matters. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Archetype. This post reflects the current opinions of the authors and is not made on behalf of Archetype or its affiliates and does not necessarily reflect the opinions of Archetype, its affiliates or individuals associated with Archetype. The opinions reflected herein are subject to change without being updated.*