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The Best Store of Money

Last Updated May 06, 2020
Reading Times:
Summary only: 1 minute
Full guide: 38 minutes

March 15, 2020 Update — The Fed just cut interest rates to 0.00%-0.25% due to the impact of COVID-19 on the US economy. Yield for the typical government money market fund will likely fall to this range, which means that your expected yield will be depressed until the economy picks back up (which will hopefully occur after the Coronavirus pandemic subsides). Yield is one of our primary considerations when making this guide, so we've updated it with our thoughts on how this affects where you should store your startup's money over both the short-term and long-term. We will also update it again after yields stabilize over the next few days.

March 4, 2020 Update — The Fed cut interest rates by around 0.40% as a response to the recent Coronavirus outbreak. Your expected yield has decreased around 25% from a week ago (we've already updated this guide to take into account the most current numbers). We think that net yield is still usefully high, and there's also a decent chance that these numbers will rebound after the Coronavirus outbreak subsides. However, if the Coronavirus situation keeps on deteriorating, then rates may continue to fall, and we'll update our advice accordingly. We'll monitor the situation and keep you updated.

Introduction

We believe there is no reason to keep your startup's fundraise in a zero-interest bank account. If you're a typical seed-stage startup that has raised some money, you'll earn tens of thousands of extra dollars simply by storing your money in a high-yield account. For a typical series A/B startup, this will likely reach into the hundreds of thousands. This goes a long way towards reducing burn and preserving your runway. We've spent several months storing our own fundraise in various bank and cash management accounts, and we've finally settled down into Brex Cash, which we believe is the best risk-free option for most startups to store their money.

Summary

  • Most startups use zero-yield bank accounts.
  • When we first wrote this guide, switching to a high-yield account would net your startup ~1.00% annual yield. If you raised $500k, you'd net $5,000 per year. $3 million ⇒ $30k/yr. $12 million ⇒ $120k/yr.
  • As excessive it may sound, we genuinely think this is "free money" for a lot of startups.
  • Since the COVID-19-induced downturn, yield has decreased significantly. This doesn't impact any of our recommendations or ratings (for reasons we'll explain) but does mean that any opportunity cost of not switching is significantly decreased.
  • Use a risk-free account to ensure your money stays safe. The highest-yield risk-free accounts are collateralized by US government-backed securities, i.e. a US government money market fund.
  • Bank accounts should store your money securely and then get out of your way. Apart from yield and risk-free-ness, we heavily evaluated ease-of-use, activation energy (i.e. switching costs), and customer service.
  • We tested eight bank and cash accounts.
  • Our top choice was Brex Cash. It has the highest risk-free yield and makes a lot of customer-friendly decisions that we didn't find in any other bank. However, a potential downside is that at the moment, it's hard to open an account if you're not a Brex Card holder.
  • Mercury is a good alternative if you can't or don't want to join Brex. Slightly lower yield than Brex, but the ease-of-use and support is nearly as good. It has a couple of extra bank-specific features that you may need and is also open to US companies with international founders.
  • Regarding the competition: your typical startup banks (e.g. First Republic, SVB, Wells Fargo, etc.) are incentivized to give you low- (or no-) yield accounts. Customer-friendliness runs the gamut. Thankfully, in our experience, switching costs for banks are low relative to many SaaS tools, because they are "out-of-the-flow" for many business operations.

Note: this is a nascent space, and we anticipate that the landscape of options will change quickly (as will Treasury yield rates). We'll be keeping a close eye on new developments and will update this guide as soon as we have new info.

Ratings Matrix

We've summarized our findings for each of the products that we tested. The methodology, assessment process, and detailed results that led to our ratings can be found in the Methodology & Results section of this guide.

Bank or Cash Account
Effective Risk-Free Yield
Ease of Attaining Yield
Enrollment & Onboarding (activation energy / switching costs)
Compatibility
Lack of Distraction & Customer Friendliness
Brex Cash
Our take: Gave us the highest risk-free yield without any work from us, and made some uniquely-friendly product decisions that we couldn't find at any other bank that we tested. The caveat: we don't think you can get an account if you're not already a Brex Card holder.
Mercury
Our take: High risk-free yield without any work from us, albeit with a bit less transparency into interest rates and a $250k deposit requirement for higher yield. Fundamentally a startup-for-startups bank with the high user-friendliness that we'd expect from a neobank.
First Republic
Our take: FRB had high customer satisfaction across the founders we talked to due to their concierge-style banking approach. Unfortunately, getting good yield was more difficult than we expected from an otherwise customer-friendly bank.
Silicon Valley Bank
Our take: Good default yield through SVB Edge, and relatively easy to enroll in a cash sweep account for higher deposit amounts. Our main issue was that SVB seemed to have more dark patterns than the other banks we tested (e.g. making it extra difficult to close an account).
Fidelity
Our take: High default yield through their cash management account, and has the capability to micro-optimize your yield. Fidelity is quite powerful, but we think it is too distracting for startups. Enrollment and onboarding was a notable hassle.
Wells Fargo / Chase / Bank of America
Our take: A grouping of the traditional "big bank" accounts that we used as a baseline. Sweep accounts are generally moderately difficult to enroll into, but yield, once enrolled, can typically be quite good.
Azlo
Our take: One of the few neobanks that serves business customers. High-quality user experience, but didn't allow us to get any yield.

Context

Why you should care about this guide

If you don't yet have a bank account, this guide is for you. If you do have a bank account, this guide is also for you. The neat thing is that every service we discuss is either a bank account or functions well as one. Moreover, regardless of whether you have an existing bank account, the services we'll talk about can turn your idle cash into an extra few thousand/tens of thousands/hundreds of thousands of extra dollars, risk-freeIt's possible to be a bit pedantic about the term risk-free, so we'll guide you to the Investopedia page on Risk-Free Assets, which does a great job at delving deeper into the term..

An explanation: at the time of initial writing, in February of 2020, the daily Federal funds rate (commonly referred to as the Fed Rate) was approximately 1.00%, give or take some daily fluctuationsThe most up to date rates can be found at the Fed's website.

The Elephant in the Room: COVID-19

Due to the COVID-19 pandemic and the downturn of the global economy, the Fed rate was significantly cut in March 2020 to around 0.15%. This means that your effective yield from a high-yield bank or cash account has lowered substantially.

After much internal discussion, we don't think that this appreciably affects our recommendations or ratings, due to three reasons:

  1. Principal Reason — We found that most of the bank and cash accounts that we tested had near-uniform effective yield, meaning that yield decreases (and increases) affect all of the accounts in much the same manner.

  2. Many startups are gearing up for the long-term, aiming to come out of the current financial downturn alive and kicking. At that point, when the economy rebounds, yield will recover as well, which means that it's very much a consideration for long-term-thinking startups.

  3. Any additional yield, even if depressed, may make a difference for an early-stage startup.

That said, lowered yield has decreased the opportunity cost of not switching (i.e. when yield rates were high, a 6-month delay in switching to a high-yield account would translate to a significant loss of yield. With lowered yield rates, this is no longer the case, so the urgency to switch is much lower.). So while we don't think our recommendations or ratings will be affected, we do believe that there should rightly be less urgency in switching bank accounts.

For the rest of this Context section, we'll be using the Fed rate at the time of writing (1.00%) to illustrate and explain the concepts and caveats behind this topic. While the effects of lowered yield rates are easy to understand (i.e. the status quo), the mechanics and effects of high yield bank and cash accounts are harder to explain without an appreciable Fed rate.

Terminology aside, what this effectively means is that 1.00% is an approximate upper limit for risk-free yield on your otherwise-idle cashThis 1.00% number is approximately correct, but we'll dive into the caveats behind this number in a subsequent section.. If your money is stored in the right place, you should be able to realize this ≈1.00% return over the course a year. This guide is meant to help you figure out where this "right place" is.

We think that this 1.00% yield rate is sufficiently high to be quite important. This is because seed round sizes have dramatically increased over the past few years, far faster than the typical burn associated with those companiesThis is a phenomenon that's been holding quite true throughout recent YC batches.. Moreover, yield rates have shot up over the past few years, although they have been starting to shift slowly back down since March-ish 2019.

In concrete examples: if you've raised a smaller $500k seed round, you'll be able to pay for food for your founders for a year ($5k). For a larger $2 million round, you'll be able to pay for your company's benefits + perks or rent ($20k). With $14 million, you get a free engineer ($140k). Provided that switching overhead isn't too high, and the security of your money is near-guaranteed, we believe this is quite compelling from a pragmatic standpoint.

Our relationship with this topic

We've been users of every single service that'll appear in this guide. We've stored and moved a few million dollars to and from each of our accounts. We understand which traits have made our lives dramatically easier, which have made our lives considerably harder, and given us an appreciation of the tradeoffs and incentives inherent to bank accounts and cash management accounts. We're well-versed in the complex rules and regulations governing this field.

That said, because we're dealing with money, we do want to mention that you should use this guide for information purposes only. All opinions that we express are from our research and the personal experiences of the founders that we've talked to. This guide is intended to be educational material only. Please independently research and verify any information that you find in this guide. We have done our best to make sure that this guide is accurate and up-to-date. Regardless, any information in this guide is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.

Caveats on your effective rate of return

The 1.00% rate of return is oversimplified, and we'll use this section to explain the numbers behind this number.

First off, cash management accounts and sweep accounts need to make money themselves and take a management fee that typically hovers around 0.25%. Note that this is a percentage of the total amount of money in your account (i.e. your net return is ~1.00% minus 0.25%).

Management fees are counteracted by the fact that high-yield, risk-free investments are made in government money market securities, which have slightly higher yield rates than treasury bills alone. Government money market securities are a combination of treasury bills and repurchase agreements fully collateralized by cash or government securities. They are exceedingly safe due to the creditworthiness of the US government and short maturity (i.e., high liquidity), such that the SIPC even acknowledges that they are often considered equivalent to cash-in-handhttps://www.sipc.org/for-investors/what-sipc-protects.

However, to be very explicit, there is no guarantee that your money will be preserved, though you can be quite confident that this is one of the safest places your money can be. For example, for treasury bills to cause you to lose your money, you'll need something the lines of the US government defaulting on its debt, in which case you'll likely have much more significant issues to worry about. Again, please refer to the Investopedia page on Risk-Free AssetsYou could actually argue that government securities are a safer place to keep your money in than a bank account because the latter has the risk of bank runs and the like..

One thing to note is that both the yield from a cash management account and the interest from a high-yield savings account are taxableInterestingly enough, there's a decent chance you didn't know this because you're only taxed for interest earned above $10 in a tax year, which seldom happens given the negligible interest rates for most business bank accounts. However, given that this guide is targeted towards startupsAs per Paul Graham's definition of a startup., which are more likely than not going to be reinvesting these gains back into the startup (and also likely to be running in the red to begin with), you should have no tax liabilityFor those that are profitable — a big congratulations to you. This isn't sarcasm, and it feels a bit weird to have to say that.. That said, there are edge-case situations in which this may not be true (e.g. if the yield tips your company from unprofitable to profitable), so you should try to get a stamp of approval from a financial advisor.

Methodology & Results

Evaluation Criteria

Ultimately, an optimal store of money will accomplish three things: be safe, make you some extra money, and get out of your way. Having used the banks and products mentioned in this guide, we're confident that there are five main things to evaluate: yield rate, activation energy/switching costs (i.e. onboarding), risk (specifically the lack thereof), compatibility & integrations, and fees & other limitations.

Yield rate is the reason why we wrote this guide in the first place. Given that your business cash would otherwise be sitting idle in a business bank account with an interest rate around a few basis points (if at all), we looked for the highest yield rate on a risk-free account. The best risk-free accounts have yields that are approximately in line with the daily Fed rate. Sometimes, some limitations make the effective yield rate lower than the advertised values. We will point these out as we see them.

Onboarding is important for the opportunity cost, specifically around switching. This is less important (relatively speaking) if you are opening up your company's first account because you are forced to go through the onboarding process to begin with. However, this guide is also meant to be applicable to companies that want to move their otherwise idle cash into a high-yield account, which is the situation we faced a few months ago. For those situations, there is a non-negligible switching cost, in which case speedy onboarding becomes more critical. This goes beyond the time cost of onboarding itself. If you put off setting up an account for a few months because you have to jump through a lot of hoops, you're losing out on a lot of potential yieldThis is precisely what happened to us when we tried to set up an account with Fidelity..

Risk is commensurate with potential upside. That said, we will only recommend risk-free stores of money. The money you receive is meant to help your startup succeed, not for speculative investments. Risk-free accounts are savings account from a bank or a cash management/sweep account that invests in government-backed money market funds. Some money management accounts have the option to invest the money into higher-yield funds that carry non-negligible risk. These include non-government money market funds and even riskier mutual funds. Even though this is an option, we do not recommend thisAnother way of thinking about speculation, illustrated through a more extreme example: you could use your company's idle cash to buy a house in SF and try to sell it off for a premium when you need liquidity. However, this should seem like an irresponsible use of company money., and we'll point these out when they appear.

Compatibility & Integrations are important because they enable cash management accounts to be used as a replacement for bank accounts. Historically, one of the reasons why cash management accounts were less popular was because they could not be used in complete lieu of a bank account. For example, in the past, it was difficult to link payroll to a cash management account, and therefore a company would still need a bank account to perform routine tasks. This meant that you still needed a checking account with a decent amount of working capital on top of a cash management account, which was a headache and carried overhead due to having to routinely transfer money between the accountsIf you maintained too high of a balance in your checking account, then you lose out on the benefits of a high-yield account. Too little, and you might accidentally miss payroll.. However, there is a new group of startups popping up that provide these integrations directly through a cash management account, enabling the account to function, for all intents and purposes, as a bona fide bank account replacement. There are also secondary integrations with bookkeeping and accounting software, though those are typically standard across most banks and bank alternatives.

Fees & Other Limitations may sometimes show up in various forms, and are things to keep an eye out for, as they can start taking your focus away from a more important thing: running your business. These include fees on wires, monthly fees, and minimum balances, among a few others. The worse-case is when these restrictions start crawling into your mind before you conduct a transaction; having to double-check your every move when dealing with routine banking tasks is one way to distract yourself for the better part of an hour.

Initial Context

We started with a broad selection of banks and bank alternatives, running the gamut from business accounts at traditional "big bank" accounts (Wells Fargo, Chase, Bank of America), established startup-oriented banks (SVB, First Republic), newer startup-for-startup banks (Mercury), other online-only neobanks not targeted explicitly towards startups (e.g. Azlo), traditional cash management accounts (Fidelity), and newer startup-for-startup cash management accounts (Brex Cash).

We did not consider neobanks that did not support business accounts (e.g. Monzo), as well as banks with limited geographic availability (e.g. Radius Bank), even though both types of banks often have good NPS scoresi.e. high customer satisfaction.

Assessment 1: Availability of appreciable risk-free yield

In our first assessment, we identified any bank or cash accounts that did not have an option to get an appreciable risk-free yield, whether through a risk-free cash sweep programMore on sweep accounts in a bit. or good interest on bank deposits. We looked at effective yield and ease-of-enrollment later in the process — at this point, we only aimed to identify any banks that didn't provide any appreciable yield. Every bank that we tested except for Azlo had some sort of high-interest savings account or risk-free cash sweep account.

Assessment 2: Difficulty of attaining yield

However, we found that there is widely varying difficulty in actually attaining this yield. Cash management accounts are designed to function as sweep accounts, where your idle money is "swept" into a higher-interest money market fund. Importantly, these sweep accounts are quite accountholder-friendly from an opportunity cost standpoint. Because cash accounts are incentivized to enable you to invest without difficulty, they are typically well-aligned with the account holder. Difficulty in attaining yield is mostly isolated to banks. Most banks offer risk-free yield through a sweep account. However, banks have significantly higher margins when they use your money to power their lending services (e.g. mortgages, loans, etc.), which have the added benefit (for the banks) of having a relatively opaque return. With a cash sweep service, the total yield is capped by the treasury rate, and their margin becomes the management fee. This is why banks typically try to avoid giving you the option to sweep your cash into a money market fund, and even if they do, try to make it as difficult as possible for you to participate — their upside is simply much lower.

Therefore, at this point, we evaluated how hard it was to attain this yield. The two cash management accounts we tested, Fidelity and Brex Cash, invest by default in a risk-free government money market fund — SPAXX and DGCXX, respectively.

For all of the traditional "big banks," we had to call and/or fax various forms to enroll, which ended up taking a couple of hours for each one. However, even though the process was not easy, it was at least standardized, and we were able to set up a cash sweep account with each one.

We didn't have much luck with First Republic, which was surprising to us, given that FRB is known for being relatively founder-friendly. First Republic's default savings yield is quite abysmal (just a few basis points), so we looked to enroll in their higher-yield government money market cash sweep program. To do so, we had to speak to a wealth management lead, who communicated to us that the cash sweep program was not something that they tended to let early-stage startups participate in, although they could always make exceptions.

Mercury and SVB were the best banks in this specific assessment. Mercury forgoes the cash sweep entirely, and instead gives you high-interest on your savings account, by default, if you have over $250k in checking or are part of their VIP program (which they call the Tea Room). SVB also gives you high-interest on your savings account (for accounts their SVB Edge program, which early-stage founders are usually auto-enrolled in), but only up to a deposit limit of $1 million. There is an option to enroll in a cash sweep program for higher deposit amounts, and our experience enrolling in an SVB cash sweep program was comparable to our experience doing so with a big bank.

Assessment 3: Effective risk-free yield

All of the government money market funds available through cash sweep programs will have yields that are comparable to each other. This is because the investment instruments that are held are stable, well-known quantities that are collateralized by, or are, government securitiesIn fact, the similarities in yield are an indicator of the risk-free nature of these funds.. While short term fluctuations and variations in instrument distribution may affect which cash sweep program has the highest yield, all of the cash sweep programs are fundamentally comparable in terms of theoretical yield.

Moreover, as we previously discussed, government money market funds will have yields that closely reflect the current Fed rateWhich can be found on the Fed's website.. This means that your yields will follow fluctuations in the interest rate, both up and down, depending on market conditions. However, given that we have the prospectuses for all of these funds, we can also be quite sure that these yields will be the highest yields that are possible to achieve in a risk-free manner.

This is the crux of why we would recommend sweep accounts. If the Fed rate is low, you should still get at least as much yield as you would from a typical bank account. And when the Fed rate increases again, you'll be able to reap the benefits of high yield rates without having to distract yourself with moving to a different bank or cash management account.

Mercury is a notable exception. It doesn't provide any cash sweep option and instead gives high-interest rates on its savings account, comparable to the Fed rate. Offering high savings yield is interesting — because it is provided independent of a money market fund, there is no transparency behind the interest rateCompared to MMFs, which are all required to provide prospectuses.. This means that Mercury could theoretically change interest rates at their discretion. That said, we have been tracking Mercury's interest rates for the past few months to identify what their interest rate is pegged on. Over this time, we found that its yield has consistently been slightly lower than the competition, between 0 and 10 basis points less than the government money market funds that we were comparing it against. In our opinion, this is a negligible difference, though we are keeping an eye out in case the yield changes.

Here is a crucial part of this section: so far, we have been comparing theoretical yield. While we found theoretical yield to be comparable across banks, we found that effective yields might not be. The main culprit is the split between the zero-interest checking and savings or money market accountInterest for checking accounts for business customers used to be prohibited by Regulation Q, although the relevant provision has since been repealed. However, due to a variety of incentives provided by the government, most banks will still offer zero-interest business accounts.. For savings/sweep accounts, there are federally-mandated limitations to the number of transfers/withdrawals a month, which means that a substantial portion of your total cash-in-bank would have to remain in your checking account as non-interest-bearing working capital. Sometimes, bank savings accounts will also explicitly require a minimum balance in your checking account, which reduces yield as wellThis was historically an issue with Mercury, which required $250k minimum in checking to access higher yield in savings, though that has recently changed to $250k minimum in total deposits.. This is a downside that only affects banks — because the cash management accounts from Brex Cash and Fidelity don't have this checking/savings delineation, they don't have this issue.

Assessment 4: Onboarding

However, it being easy to attain good yield when you're an account holder doesn't mean that it's easy to acquire an account in the first place. Therefore, we evaluated the difficulty of opening an account with the various banks and cash management services.

Azlo, Mercury, and Brex Cash have decently straightforward online-only applications that were easy and straightforward to complete. It took about 20-30 minutes to complete each application, after which it would take another day or two for the application to be manually reviewed.

One potential dealbreaker for Brex Cash specifically, however, is that it is currently only available for Brex Card holders. Non-Brex Card holders can enter into a waitlist for Brex Cash, but we have not heard of any non-Card holders who have successfully acquired a Brex Cash account by itself. Brex Cash is still advertised as a beta product, so this limitation might be lifted in the future.

SVB and First Republic are somewhat easy to apply for online. They embrace the startup experience a bit more than the more traditional banks, and in many cases, you can enroll without going in person, with a few back-and-forth emails and perhaps a phone call or two. That said, there's still a chance that you'll have to visit in person to complete your application if your to-be banker is worried about complying with know-your-customer regulations. That said, given their frequent startup clientele, it's usually a more straightforward process compared to a traditional bank.

Traditional banks typically have more stringent risk management, usually does not account for the specifics of early-stage startups. Therefore, opening an account for an early-stage startup with one of these banks will almost always require an in-person visit to a local bank branch and an appointment with a banker.

Fidelity had the most time-consuming enrollment process because of their more stringent risk management, and because their risk management team is not co-located with any physical office. This means that the easiest way to get your application processed is to print and mail several forms, and then engage in mail-based back-and-forth with their risk team to ensure they abide by know-your-customer regulations. In our case, this entire process distracted us for over a month, which we think is long and onerous enough to counteract Fidelity's advantages.

Assessment 5: Compatibility

For the longest time, traditional bank accounts have been associated with a consistent set of capabilities, such as checks and brick-and-mortar locations. Newer digital-only neobanks forgo some of these features that would otherwise be taken for granted. In a similar vein, some cash management accounts, such as those geared towards personal wealth management, may only support a limited set of deposit/transfer methods that preclude them from being used for typical bank account purposes, such as payroll and payment processor depositsE.g. some cash management services focus on wealth management and not day-to-day transactions, and only support ACH transfers due to their low cost..

Therefore, in this evaluation, we compared the functionality and capabilities of each service, using the feature set of traditional big bank accounts as a benchmark.

Both of the cash management accounts that we tested, Fidelity and Brex Cash, provided support ACH and bank wires. This means that they had routing and account numbers that can be used in lieu of a bank account for deposit or payment purposes. We've tested both with inbound deposits using Stripe and outbound transfers using Gusto, and have found both to work without issue in this capacity.

Of the bank and cash accounts that we tested, all but Mercury, Azlo, and Brex Cash supported physical checkwriting. Mercury still allows you to send physical checks through their online interface, but you won't have any physical checkbook. Azlo doesn't support checkwriting in any capacity. Brex Cash was interesting — they also don't support checkwriting in any capacity, but they provide fee-free wiresIn fact, they'll give you reward points for sending a wire., which we found to be a more-than-suitable replacement (more on this later). We discovered all but Brex Cash supported that check deposits.

All of the services have some integration with bookkeeping software like Xero and Quickbooks, and also enable separate user accounts with limited permissions to be created for bookkeepers. We didn't find anything exceptional in this direction from any of the providers.

We found that Mercury and Brex Cash were missing support for recurring, customer-initiated payments (e.g. Bill Pay)This is different from third-party withdrawals for subscription services, which worked with all of the bank and cash accounts we tested..

Perhaps not particularly relevant for most startups, but for the sake of comprehensiveness: all providers except for Brex Cash have support for debit cards and ATM withdrawals, and Brex has a good replacement for the former with their Brex Card productJust to reiterate, to our understanding, there's no way to be a Brex Cash member without jointly holding a Brex Card..

Assessment 6: Level of distraction & customer friendliness

The goal of a store of money for any early-stage startup should be to store your money securely, give you good yield, and then get out of your way for everything else. Evaluating the amount of distraction that a bank or cash account produces is akin to assessing both ease-of-use and limitations, and is closely intertwined with the overall customer friendliness of a store of money. We'll summarize our findings in this section. As before, we will use traditional "big bank" accounts as a baseline for comparison.

In our opinion, Fidelity was the most distracting place that we tested. As previously mentioned, our application process entailed back-and-forth paper correspondence, which both distracted us from our bigger day-to-day priorities, and delayed our initial yield accrual due to the onboarding time. Moreover, Fidelity gears itself towards professional wealth management, which means that there is a large selection of possible positions, and it may be hard to identify which position has the best risk-free yield. We don't think that making the effort to figure this out is a good use of time and energy for an early-stage startup, even though you can typically get the highest risk-free yield from Fidelity.

For banks, SVB was the most distracting, which unfortunately detracted from its otherwise quite-good sweep yield. Their online interface was a bit antiquated compared to the competition, but it didn't make or break the experience. More importantly, for us, we were upset by SVB's general lack of customer friendliness. For example, if you want to close your account because you transferred your money and don't want to pay the $25/month maintenance fee on an empty account, you'll be forced to fax them a notice on official company letterhead. We were also excited initially to see a high-yield savings account until we realized that we would only accrue yield on amounts under $1M. We weren't given any indication that we needed to use their cash sweep program to earn yield on amounts over that threshold.

First Republic was a mixed bag, although weighted towards the good. They had a "concierge" model for startup banking, where we got a dedicated FRB Batline that we could call or text when we needed help. While we don't expect this to be necessary for most startups, we found this to be a pleasant addition for our specific situation, as we rapidly stress-tested the functionality of each bank and cash account. The big takeaway for us was that there appeared to be a bent towards customer friendliness, even on the small things, shown through things like free wires and credits like 409As. In this manner, the core banking service of FRB did a fine job for us and justified the high NPS that we've heard from other founders. That said, enrolling in the cash sweep program requires engaging their wealth management team, as we explained before, which was a process that we didn't think was a good use of time.

Mercury and Brex Cash were the least distracting stores of money that we used. Because they represent the newer startup-for-startup bank and bank alternative, they have oriented themselves towards differentiating through user experience more than the traditional banks. Mercury only charges fees on outbound wires, and Brex Cash doesn't charge any fees on any type of transactionIn fact, Brex Cash will give you points akin to credit card rewards when you execute a wire transfer.. We don't think that this is a make-or-break feature in itself, as your total savings as a startup won't be substantial in itselfWe've surveyed a few founders and found that wire fee savings were typically between $25 to $250 a year.. Instead, we saw it as a solid indicator that Mercury and Brex Cash were willing to avoid nickel-and-diming us, as wires do cost the financial institution a non-negligible fee to process.

Mercury has an integrated analytics dashboard for cashflow. We were given auto-generated graphs and tables that tracked revenue (specifically deposits), expenses, and money in the bank over time. We were also given runway projections. We thought that the idea was good, but it wasn't as useful as we had hoped. Revenue should already be tracked through an event-based analytics service vs. through your bank account. The expenses breakdown isn't particularly useful if you have a business credit card (as monthly statements will be aggregated), although it'll be useful if you rely solely on Mercury's debit card. We also found that historical burn rates have high enough variance to make runway predictions not particularly accurate.

Because cash management accounts like Brex Cash and Fidelity comprise a single account — they don't have the checking and savings delineation that traditional bank accounts have. This means that you can earn interest on every single dollar you have on that account rather than only earning interest on the money in your savings account. We found that this simplifies the yield process and user experience substantially because bank savings accounts have federally-mandated limitations to the number of transfers/withdrawals a month, which means that a substantial portion of your total cash-in-bank would have to remain in your checking account as working capital. Sometimes, bank savings accounts will also explicitly require a minimum balance in your checking account, which reduces yield as well.

One final note about Brex Cash that we were pleasantly surprised about: when you send money to Brex Cash from a different bank, you'll have credit for it immediately, even before the money hits your account. Usually, the sending bank will enforce a lockup period of a few days for interbank transfers, but Brex has enough trust in you (and/or good enough risk management) that it'll credit your account before any money arrives.

Recommendations

Our Recommendation: Brex Cash

Brex Cash was the place that we ultimately decided to transfer our own money into, and is the store of money that we would currently recommend for most early-stage startups that are okay with the Brex ecosystem. While most bank or cash accounts have some way to get the highest risk-free yield, we found that Brex Cash was the only place that provided this yield without lots of distraction on our part.

Moreover, we thought that out of all of the stores of money that we tested, Brex Cash had the best basic functionality. It did a great job of getting out of our way, but so did many (although not all) of the bank accounts we tested. What stood out to us was that Brex Cash kept on deviating from the status quo in user-friendly ways. Two examples:

  1. Normally, when we transferred money into a typical bank account, that money was locked up for a couple of days. When we moved funds to our Brex Cash account, it was credited to our account immediately, even though Brex hadn't received the funds.
  2. Instead of paying for wires, we got paid (via reward points) to send wires.

We suspect that this user-friendliness is because Brex Cash is meant to be lead-gen for Brex Card. This setup would explain how Brex Cash can be a lot more user-friendly, as it wouldn't need to be a sustainable revenue source for Brex, thereby passing on a lot of the benefits and yield to the end-user. However, to the best of our understanding, it also means that you can't enroll in Brex Cash without enrolling in Brex Card at the same time.

In general, if you can forgo things like checks and are able/willing to open an account, then we think that Brex Cash is the best store of money.

Summary of Brex Cash's Assessment Results

This is a heavily-summarized list of our assessment's results and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available.

  • Assessment 2: Difficulty of attaining yield: Brex Cash invests by default in a risk-free government money market fund, DGCXX. This is a cash sweep, which we give background on in our Assessment 2 section. Importantly, no work was required on our part.

  • Assessment 3: Effective risk-free yield: As we detail in our background to this assessment, we recommend cash sweeps into a government money market fund, due to their highest effective-risk free yield. Brex Cash is no exception, tied with other cash sweep programs for the highest risk-free yield.

  • Assessment 4: Onboarding: Brex Cash has a simple and straightforward online application, and turnaround was quick — within a day. However, a potential dealbreaker is that it appears that Brex Cash is currently only available to Brex Card holders. We think that this is the primary downside of Brex Cash, as some startups may not want to join the Brex ecosystem in this manner.

  • Assessment 5: Compatibility: Brex Cash has everything you need from a basic bank account, e.g. routing/account numbers, support for ACH transactions + wires, and basic bookkeeping support. However, there wasn't much beyond this functionality, although we don't think most early-stage startups require anything more.

  • Assessment 6: Level of distraction & customer friendliness: We thought that Brex Cash was tied with Mercury as the least distracting store of money. We thought that Brex Cash made the most customer-friendly decisions out of all of the accounts that we've tested. Our Assessment 6 section provides a more detailed look into the customer-friendly decisions we've noticed.

Mercury is a full-service bank geared toward startups. When we tested, we found that Mercury's effective yield is on par, if only slightly lower (due to the checking/savings split and the less transparent yield) than the yield from the best bank and cash accounts. Importantly, Mercury was the only bonafide bank that allowed us to get this yield across all of our savings deposits by default.

We found that Mercury was one of the least distracting bank accounts that we tested and had more standard bank functionality compared to Brex Cash. Mercury has a unique cashflow analytics dashboard, although we didn't find it to be particularly useful in practice. We thought that its main advantage was in providing good, high-yield banking that's widely accessible to most startups. There is no ecosystem that you need to buy into and no minimum to qualify for enrollment, and, importantly, we found that Mercury will accept international founders without an issue (provided that they have incorporated a US-based company).

Summary of Mercury's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available.

  • Assessment 2: Difficulty of attaining yield: Mercury is the only bank that forgoes the cash sweep, and instead gives you high yield on your savings account by default, provided that you meet some requirements (over $250k in deposits, or a member of their Tea Room program). Therefore, there is no difficulty in attaining high yield.

  • Assessment 3: Effective risk-free yield: Mercury skips the cash sweep route, and instead provides a less transparent interest rate. We found this to mostly match up with the competition, although it fell short on some occasions. That said, we think that it is a highly competitive yield. One additional downside is the checking/savings split for a bank account, which lowers effective yield. We have more info on both of these factors in our Assessment 3 section.

  • Assessment 4: Onboarding: Mercury had a simple and straightforward online application. We had no issue whatsoever with onboarding.

  • Assessment 5: Compatibility: We found that Mercury had most of the functionality you would expect from a traditional bank account, minus physical checks and recurring payments. You can find a full overview of missing features in our Assessment 5 section.

  • Assessment 6: Level of distraction & customer friendliness: We thought that Mercury was tied with Brex Cash as the least distracting store of money, in terms of core bank account experience. Mercury has some unique standalone functionality, such as an analytics dashboard for cash flow, which was nice to have, but not a make-or-break feature (more details in our Assessment 6 section).

Remaining Competition

Silicon Valley Bank

Silicon Valley Bank is billed as the standard bank for Silicon Valley startups. It has particularly good loan facilities that are geared towards companies. The application and onboard process wasn't particularly difficult nor particularly easy. That said, their SVB Edge account gives high yield by default, although this is only up to $1 million in deposits (as per the fine print). Higher yield has to be attained through a cash sweep account, which isn't too difficult to take advantage of.

The issue is that we think that SVB takes advantage of some dark patterns. For example, if you want to close your account because you transferred your money and don't want to pay the $25/month maintenance fee on an empty account, you'll be forced to fax them a notice on official company letterhead.

Summary of SVB's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available.

  • Assessment 2: Difficulty of attaining yield: SVB is near the top of this assessment, as they give high-interest on savings accounts for founders in their SVB Edge program, which most early-stage founders are enrolled into. However, this default yield is only available up to $1 million in deposits, above which you'll need to enroll in a cash sweep account. Accomplishing the latter isn't particularly difficult.

  • Assessment 3: Effective risk-free yield: SVB provides a government money market cash sweep program, and is tied with most other banks for the highest effective risk-free yield.

  • Assessment 4: Onboarding: SVB isn't particularly challenging to apply for, mainly because they are more familiar with startups than many other banks. Mostly uneventful, but certainly better than more traditional big banks.

  • Assessment 5: Compatibility: Fully-fledged compatibility, and particularly good debt facilities, although an early-stage startup likely won't have to think about the latter for a while.

  • Assessment 6: Level of distraction & customer friendliness: We found SVB to be the most distracting bank that we tested. We thought that SVB was the least customer-friendly bank that we tested. We give specific examples in our Assessment 6 section.

Fidelity

Fidelity provides a cash management account like Brex Cash that allows you to choose from many money market funds to invest in and gives you transparent information on yield. However, these choices matter less because startups should only be storing their money in a risk-free government money market fund — the greater choice is more for the benefit of personal/professional investors, who have higher risk tolerance. However, the critical part of our testing was that we found that Fidelity has a head-banging onboarding process replete with physical mail, days of turnaround at every step, and lots of slow risk management. We probably lost out on two months of yield simply because the onboarding process took as long as it did.

Summary of Fidelity's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available.

  • Assessment 2: Difficulty of attaining yield: Brex Cash invests by default in a risk-free government money market fund, SPAXX. This is a cash sweep, which we give background on in our Assessment 2 section. Importantly, no work was required on our part.

  • Assessment 3: Effective risk-free yield: As we detail in our background to this assessment, we recommend cash sweeps into a government money market fund, due to their highest effective-risk free yield. Fidelity is no exception, tied with other cash sweep programs for the highest risk-free yield.

  • Assessment 4: Onboarding: Fidelity has the most time-consuming enrollment process and had much more risk management than other financial institutions. For us, this meant that it took over a month to open an account with Fidelity, with a lot of back-and-forth physical mail along the way.

  • Assessment 5: Compatibility: Fidelity has everything you need from a basic bank account, e.g. routing/account numbers, support for ACH transactions + wires, and basic bookkeeping support. However, there wasn't much beyond this functionality, although we don't think most early-stage startups require anything more.

  • Assessment 6: Level of distraction & customer friendliness: In addition to a highly-distracting application process, Fidelity is geared towards more professional wealth management, which means that much of its functionality is overkill and confusing for startups looking to use it as a high-yield store of money.

First Republic

First Republic Bank is a well-regarded bank for startups (it has one of the highest NPS scores among startup founders) and does an excellent job with all of the functionality you'd expect from a bank. They have a concierge-style of customer engagement, where you have a dedicated phone number to call/text when you need help. Out of all of the traditional banks who we talked with founders about, we found that only First Republic had lots of positive sentiment.

However, the customer friendliness of their banking division isn't reciprocated in their wealth management division, as we found it hard to enroll in a high-yield cash sweep account. Their standard business checking yield, at a couple of basis points, is otherwise nonexistent.

Summary of FRB's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available.

  • Assessment 2: Difficulty of attaining yield: Contrary to FRB's reputation of founder-friendliness, we weren't able to enroll in a cash sweep program without difficulty on our part. We think this is because cash sweeps are managed by FRB's wealth management division, which is unusually far-removed from their core banking division that's mainly known for founder-friendliness.

  • Assessment 3: Effective risk-free yield: FRB provides a government money market cash sweep program, and is tied with most other banks for the highest effective risk-free yield.

  • Assessment 4: Onboarding: FRB isn't particularly challenging to apply for, mainly because they, like SVB, are more familiar with startups than many other banks. Mostly uneventful, but certainly better than more traditional big banks.

  • Assessment 5: Compatibility: Fully-fledged compatibility, as you would expect from a more traditional bank account.

  • Assessment 6: Level of distraction & customer friendliness: In general, FRB did a uniquely good job of in-person service and aimed towards founder-friendliness in most situations. However, this wasn't reflected in their wealth management division, who we had to go through to enroll in a cash sweep.

Wells Fargo / Bank of America / Chase (traditional big banks)

Although we are reluctant to generalize, Wells Fargo / Bank of America / Chase / other large consumer-oriented banks generally follow the same trend as First Republic, except less customer friendly and with harder-to-use online portals. All have business cash sweep programs that you can enroll in with moderate difficulty. In general, they have comparable yield to more startup-friendly financial institutions, but aren't as user-friendly.

Summary of Wells Fargo / BoA / Chase's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Available for all three banks.

  • Assessment 2: Difficulty of attaining yield: All three banks require a non-negligible amount of work to enroll in a cash sweep (i.e. fax, phone, or in-person). It's manageable, albeit quite distracting.

  • Assessment 3: Effective risk-free yield: All three banks provide some ability to enroll in a government money market cash sweep program, and is tied with most other banks for the highest effective risk-free yield.

  • Assessment 4: Onboarding: For a big bank, an in-person visit is almost always mandatory due to the more stringent risk management policies in place, which is manageable (although not optimal).

  • Assessment 5: Compatibility: Fully-fledged compatibility, as you would expect from a traditional bank account.

  • Assessment 6: Level of distraction & customer friendliness: Our experience wasn't exceptional in either direction. We used a big bank account as our baseline.

Azlo

Azlo is one of a new set of digital-only banks popping up that are known for having good, online-first user experiences and are starting to accept business customers. However, we have yet to find a neobank (beyond Mercury) that provides high-yield accounts to its business customers.

Summary of Azlo's Assessment Results

This is a heavily-summarized list of our assessment's results, and excludes background info. Detailed results for each assessment, as well as background and motivation for each assessment, can be found in their respective subsections in Methodology & Results.

  • Assessment 1: Availability of appreciable risk-free yield: Azlo was the one business bank account we tested that had no ability to earn high yield.

  • Assessment 2: Difficulty of attaining yield: Not applicable.

  • Assessment 3: Effective risk-free yield: Not applicable.

  • Assessment 4: Onboarding: Along with Brex Cash and Mercury, Azlo had some of the best enrollment and onboarding processes that we've seen throughout our tests.

  • Assessment 5: Compatibility: As a fully-digital bank, it has all of the core bank account functionality needed to run a business off of, but doesn't provide much beyond that.

  • Assessment 6: Level of distraction & customer friendliness: As a neobank, Azlo is highly user- and product-focused. We found that this resulted in a quite good digital-first experience overall, although support was lacking due to their larger, consumer-oriented focus.

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Tim S. on Wed Jun 03 2020
Is there a way to sign up to get alerted about changes to yield rates? Would be great to get pre-covid yield rates on brex cash on our seed round, but until then not sure if it's worth switching banks.
Brian Xu on Wed Jun 03 2020
Personally had a great experience with BoA up through our series A. Setup and support was easy and would recommend it.