Mercury, a startup that provides banking services to other startups, is offering customers enhanced FDIC insurance of up to $3 million through a new product following the collapse of Silicon Valley Bank. That’s 12 times the industry standard for institutions of $250,000 in FDIC insurance offered by other institutions.
Immad Akhund, the CEO and co-founder of Mercury, told TechCrunch that his team worked on the new product, called the Mercury Vault, over the weekend.
Customers, existing and new, with more than $3 million in their accounts will be asked to transfer funds to Mercury Treasury’s Vanguard money market funds, which are 99.5% invested in US government-backed securities. US (mutual funds comprised predominantly of Treasury bills) and 100% in the name of the client. As the company continues to work on the product, customers will have the option to make money movement automatic.
“So if you need to have $2 million in your operating account, we’ll make sure there’s $2 million in there so you can pay payroll and things like that, and the rest will go to the US government, T-bills and mutual funds. Akhund said.
To be clear, Mercury itself is not a bank. Through its partnerships with Choice Financial and Evolve Bank & Trust, it is able to give its clients access to “a wide network” of other banks such as Goldman Sachs and Capital One.
With Vault, Akhund said, customers not only get expanded FDIC insurance of up to $3 million, but deposits will also be spread across up to 12 different banks to spread risk and allay fears.
Vault will also, according to Akhund, “continually monitor the cash in all accounts and recommend actions to keep every dollar as safe as possible.”
“Before Thursday, I think a lot of people weren’t thinking about who really has the money and is it safe,” he said.
In general, since the news about the SVB problems became public, Mercury has had “a great number of records,” he said. While his clients are predominantly startups, Akhund says the company also caters to investors and has also received interest from venture capitalists wanting to move money this past weekend.
Mercury has more than 100,000 customers and says it has been profitable since last August. It processed more than $50 billion in transactions in 2022, up from $23 billion in 2021. The company says 50% of YC cohorts “choose Mercury as their banking partner.”
Since its inception, Mercury has raised $163 million from investors including Andreessen Horowitz (a16z), CRV, Coatue and others. His last round was a $120 million Series B which was announced in July 2021.
Meanwhile, startup Rho said it has seen increased demand for its Treasury Management Account offering that offers up to $75 million in FDIC, something it kicked off when it started in 2019 because it “knew companies would want an option to diversify their money”. said a spokesman. The corporate expense and cash management firm in 2021 raised a $75 million Series B funding round led by Dragoneer Investment Group and has raised a total of $205 million in equity and debt financing.
