Treasury management playbook: A practical guide for VC-backed startups

This content is provided for general information and knowledge-sharing purposes and reflects the perspectives and experience of CFO Advisors. The information shared in this blog is illustrative in nature and may not be applicable to every business or situation and is not intended to constitute financial advice.

CFO Advisors specializes in providing fractional Chief Financial Officer (CFO) services, with a particular focus on supporting Artificial Intelligence (AI) startups. Readers should consult their own qualified financial, accounting, legal, or other professional advisors before making decisions based on the information presented.

Closing a fundraising round is a big milestone for any startup. Let’s say you just raised $40 million. Based on your plan, you know that you’re unlikely to touch 75% of that capital for 18 months or more. So what’s the play?

If you’re like most founders, the answer may be: Park it in a checking account and get back to building. That’s understandable — treasury management isn’t why you started a company. But the opportunity cost of not earning yield on $40 million — while risk-free rates sit at 3-4% — comes out to $1.6 million or more annually. Those are significant resources that could be spent on building your team, attracting new customers, or just breathing room for your company to operate.

Here, we’ve distilled insights from heads of treasury at companies managing billions in cash, treasury portfolio managers with decades of experience, and operators who have built treasury functions from scratch. This playbook will lay out a path to capture that yield, without adding unnecessary complexity to your operations.

Every treasury decision you make should flow from three principles, applied in strict order. While it may be tempting to steer from these or mix up the sequence, these are the very foundations of treasury that have worked for some of the most profitable businesses in the world.

1. Preservation of principal

This should always come first. When investors write you a check, they’re investing in your product vision and your team, not your ability to pick winning trades. Your job is to preserve that capital until you deploy it into the business. Nanci Fastre, who leads fixed income at SVB, puts it simply: “In every single investment policy, preservation of principal is the number one objective 100% of the time.”

This means no chasing yield with risky instruments or markets. The crux of the treasury function is to keep the money safe.

2. Liquidity to support business operations

Treasury exists to serve business operations — not the other way around. The second principle ensures you never miss payroll, delay a vendor payment, or pass on a time-sensitive opportunity because your cash isn’t accessible.

This doesn’t mean keeping everything in checking accounts. It means structuring your cash so the right amount is available at the right time. You need same-day access for next week’s payroll, but capital you won’t deploy for six months can sit somewhere that works harder for you. The goal is matching liquidity to your actual operating rhythm, not defaulting to maximum access you’ll never use.

3. Yield

Once you’ve secured the capital and ensured it’s available when your company needs it, the question becomes: How do you make the rest of that cash work for you? This is where treasury stops protecting downside and starts generating real value. 

Too many founders get the order backwards — chasing yield before locking down preservation and liquidity. But the founders who get it right unlock something powerful: free optionality. Every dollar of interest earned is a dollar you didn’t have to raise, negotiate for, or dilute yourself to get. In the current environment, government money market funds and short-term Treasuries offer 3-4% returns with minimal tradeoffs.

The core of startup treasury is segmentation, in order to get as close as possible to optimizing multiple cash flows with different time horizons, liquidity needs, and instruments.

Dan Kang, CFO at Mercury, describes the approach: “Think about different tiers of capital and liquidity. Depending on each tier, you’re going to have different risk levels and time frames that dictate what instruments make sense. There also isn’t a single answer here - think about how cash moves in your business and its volatility to first determine how you should tier your cash to ensure operations are never disrupted.”

*Note: Yields as of late January 2026. Fed Funds target range is 3.50-3.75%. T-bill yields will fluctuate with Fed policy.

Tier 1: Operating cash (0-30 days)

This is your working capital — think payroll, rent, vendor payments, and anything else due within the next month. Keep 4 to 6 weeks of operating expenses here. If your business has lumpy or unpredictable cash flows, bump that to 8 to 10 weeks.

This cash lives in your primary checking account or a sweep account with same-day access. Yes, it earns almost nothing. But that’s a necessary tradeoff for instant liquidity to keep your business running.

Tier 2: Reserve cash (30-90 days)

Your buffer against the unexpected. A large customer pays late. You find a candidate you need to close immediately. An acquisition target surfaces. This tier ensures you can move without unwinding your T-bill ladder or scrambling for a bridge. Many companies allocate 10 to 30 percent of total cash here.

Mercury Treasury is built for this tier, with multiple lower-risk mutual funds to choose from that offer same- or next-day liquidity, while offering yields between 3.2% and 3.9% depending on your investment mix and deposit size. Investment options include ultra-short term corporate bonds or exposure only to government securities. This can be a way to capture near-market returns without sacrificing the ability to act fast when it matters.

Tier 3: Strategic cash (3-12+ months)

Everything else. This is capital you’ve mapped out in your plan and know you won’t touch for at least 90 days. This is where you stop paying for liquidity you don’t need and start earning a real return.

The standard approach is a T-bill ladder: Treasury bills at staggered maturities (4-week, 8-week, 13-week, 26-week, and beyond) so something is always maturing. Don’t deploy it all at once. Kang recommends dollar-cost averaging: “Park the majority in your money market fund, then each month look at what you can get on T-bills and gradually leg into your ladder.”

A well-constructed ladder extending to 24 months captures yields in the 4.0-4.3% range while maintaining the flexibility to access funds within a week if needed. While money market funds can provide comparable yields at a given point in time, purchasing T-bills helps you maintain more stable yields since yields are locked in through maturity of the T-bills. Just remember though, the longer the maturity term of a T-bill, the more sensitive they are to market conditions which could result in loss of principal if you needed to sell down the T-bill for liquidity purposes.

Tier 4: Managed Treasury Program (optional)

For companies with 24+ months of runway and larger cash balances, a managed treasury solution can push yields higher through investment-grade corporate bonds. This is not DIY territory. Corporate bonds can provide for higher yield and offer diversification outside of US treasuries. This does also introduce incremental risk to your portfolio though the universe of corporate bonds really should be limited to companies with very high credit ratings.

Only pursue this path with a firm that has the credit research infrastructure to do it right. This is most commonly offered by larger financial institutions like SVB or through fintech partnerships like Mercury Treasury Solutions by Morgan Stanley.

The situation

You've raised a $40M Series B. Monthly burn is $1M, giving you 40 months of runway. You expect to deploy this capital relatively evenly over the next 24 months. With runway this long, you qualify for the full four-tier structure, including managed corporate.

The tiers

• Tier 1 - Operating: $2M in checking (8 weeks of burn at $1M/month)
• Tier 2 - Reserve: $8M in Mercury Treasury (20% of total, earning 3.25-3.7%)
• Tier 3 - Strategic: $15M in a T-bill ladder extending to 24 months (earning 4.0-4.3%)
• Tier 4 - Managed: $15M in investment-grade corporate bonds via SVB or Mercury Treasury Solutions by Morgan Stanley (earning 4.5-5.0%)

The math

Estimated annual interest: approximately $1.6M. That’s the engineering team you didn’t have to fundraise for. Or the extra runway that lets you negotiate your Series C from strength instead of necessity. Over 24 months, this structure generates $2-3 million or more in interest, extending your runway by three full months without touching your equity.

Compare that to the default: $40 million in checking earning zero. Same company, same burn, same product. One version has a whole seed-size additional amount of capital, while the other left it all on the table.

How often should I rebalance?

For many, monthly is plenty. Setting a recurring calendar event to review your cash positions, check what's maturing, evaluate whether your future cashflow expectations have changed, and decide whether to roll or let cash flow up the tiers is an example of a process to manage. It’s also recommended to revisit after major cash events: new funding, large customer prepayments, or significant one-time expenses.

What happens if I need cash before a T-bill or bond matures?

Securities can typically be sold  in the secondary market, often with same-day or next-day settlement. For T-bills, the impact is often limited. In a declining rate environment, you may actually get a small premium since your older bill yields more than new issues. For corporate bonds, spreads can be slightly wider, but investment-grade papers are generally more liquid. Some treasury structures include a Tier 2 reserve so longer-dated holdings are less likely to be accessed unexpectedly.

When do I need a dedicated treasury person?

For many companies, this is later than most people think. With the right systems, a CFO or VP Finance can typically manage treasury in a few hours per month through Series C and beyond. The trigger isn't company size, it's complexity: multiple entities, international cash pools, debt facilities with cash covenants, or active hedging requirements. Until you hit those, you can choose to keep it simple.

Should I buy T-bills directly or through a provider?

Either works. Direct purchase through TreasuryDirect.gov is free but manual. Most startups use a broker or platform that automates the ladder and handles reinvestment. A slight fee may be charged (typically built into the spread) but this may be worth the operational simplicity. Similarly, products like Mercury can simplify the process by enabling you to invest from the same platform you use for banking or another financial service. Mercury Advisory, Fidelity, Schwab, and SVB all offer T-bill access with varying levels of automation. Choose based on your existing banking relationships and how hands-on you want to be. 

How should I adjust for a declining rate environment?

When rates are falling, you may benefit from extending duration. T-bills you buy today at 4% will look attractive when new issues yield 3.5%. Some choose to weight ladders toward the longer end (13-week, 26-week, 52-week) rather than the short end. But if rates rise unexpectedly, you could be stuck holding below-market securities with real duration risk.

What's the worst mistake in treasury?

One commonly cited risk is going long in a rising rate environment. Nanci Fastre, who leads fixed income at SVB, has seen it destroy portfolios: "The worst thing we can do is go long when rates are rising. You lock in low yields and then watch new issues pay more while you're stuck." The inverse is painful but usually survivable: going short in a falling rate environment means you earn slightly less than you could have. One is a missed opportunity. The other is actual losses.

Should I buy Bitcoin or crypto with treasury funds?

Most companies choose not to hold crypto assets as part of operating treasury since returns are driven by price movement rather than contractual income. Decisions like this are often guided by internal treasury policies rather than views on long-term asset value.

What about equities or index funds?

This is discouraged due to the fact that public equities can experience significant short-term volatility. The S&P 500 dropped 19% in 2022. Imagine explaining to your board that you can't fund your product roadmap because your treasury account is underwater. Equities are more commonly used by investors with long time horizons and higher risk tolerance. Startup operating capital is typically not suited for either.