In today’s technology-driven world, intellectual property and software assets have become some of the most valuable resources a company possesses. When seeking financing, these assets can be leveraged as collateral in escrow agreements, giving businesses a powerful tool for securing loans without traditional physical collateral. PRAXIS Technology Escrow provides a secure, SOC2-compliant environment to protect these critical assets, ensuring that both lenders and borrowers have peace of mind.
What Can Be Placed in an Escrow Agreement as Collateral?
Many types of technology assets can serve as collateral in an escrow agreement. At PRAXIS, we specialize in protecting the following:
- Source Code: The heart of any software or SaaS application, source code can be deposited into escrow to guarantee the lender that they have access to the core intellectual property if the borrower defaults on the loan.
- Software Applications: Entire software builds, including executables, libraries, and databases, can be held in escrow to ensure that the lender can take control if necessary.
- Proprietary Algorithms: For companies that have developed unique algorithms, these can be placed in escrow to serve as collateral.
- Documentation and Data: Technical documentation, user guides, and essential data required for the operation of a system can also be deposited to ensure that the lender has all the necessary materials.
- Formulas and Recipes: Food, chemical, supplement and other recipes and formulas can be placed into escrow and serve as collateral for loans and equity investments.
Examples of Technology as Collateral in Escrow Agreements
Here are a few examples of how businesses have successfully used technology escrow agreements as collateral:
Startup Securing Growth Funding: A SaaS startup providing industry-specific management software needed to secure a large loan for product development. By placing their proprietary software source code in an escrow agreement, they assured the lender that the asset would be available if the company could not meet its loan obligations.
Enterprise Expanding with IP-Backed Financing: A large enterprise with patented algorithms for machine learning placed those algorithms and supporting code in escrow to back a loan for international expansion, reducing the lender’s risk and securing better loan terms.
Tech Company Acquiring Debt for R&D: A software company that develops cutting-edge IoT technology used its source code and technical infrastructure in an escrow agreement, allowing them to use future innovations as collateral for a development loan.
The Importance of Periodic Technical Verification
When technology is used as collateral in an escrow agreement, it is critical to ensure that the assets are complete and functional. Simply depositing code or documentation isn’t enough—lenders and borrowers need confidence that the materials will be usable if they are ever needed.
PRAXIS offers technical verification services that periodically review and validate the contents of the escrow deposit. This process ensures that the deposited materials:
- Are Complete: All necessary components, including source code, executable files, data, and documentation, are present.
- Are Functional: The software or system can be fully reproduced from the materials, and the code can be compiled and run as intended.
- Are Updated: Over time, software evolves. Periodic verification ensures that the materials in escrow reflect the latest, most stable version of the technology, maintaining its value as collateral.
- In the event that PRAXIS is holding assets other than source code for software and SaaS applications, we can often facilitate the viewing of the escrowed materials by industry experts selected by the lender or investor.
Without these checks, an escrow deposit could become outdated or incomplete, rendering it useless when needed. At PRAXIS, we ensure that your collateral remains secure and functional throughout the lifecycle of the escrow agreement.
Get Started with PRAXIS Technology Escrow
By leveraging a technology escrow agreement as collateral, businesses can access critical funding while maintaining the security and ownership of their intellectual property. With PRAXIS Technology Escrow, your assets are protected, verified, and ready to serve as valuable collateral when you need them most.
Frequently Asked Questions
Domain name escrow is a service where a trusted third party, like PRAXIS, holds and manages the domain name and funds during a transaction. The escrow agent ensures that both the buyer and seller fulfill their obligations before the domain and payment are transferred.
Domain escrow provides security and peace of mind for both parties in a transaction. It ensures that the buyer’s payment is protected and that the domain is securely transferred without any risks of fraud or disputes.
The process begins with an agreement between the buyer, seller, and PRAXIS. Once terms are set, the seller transfers the domain to PRAXIS and the buyer deposits the funds. After verifying the transfer of the domain and the receipt of funds, PRAXIS releases the funds to the seller and the domain to the buyer.
The timeline varies based on the complexity of the transaction and the registrars’ transfer timelines, but most domain escrow transactions can be completed within a few days once all parties meet their requirements.
PRAXIS charges a fee based on the transaction value and services provided. The fees are typically shared between the buyer and seller, but specific arrangements can be made based on the agreement.
Yes, domain escrow is highly secure. PRAXIS employs stringent security protocols to protect both the funds and the domain during the transaction, ensuring all parties’ interests are safeguarded.
Absolutely. PRAXIS offers long-term escrow services where domains are held in escrow until the payment plan is complete. This ensures ongoing protection and compliance throughout the transaction period.