Top 5 Reasons Why Investment Firms Need Software Escrow For Protection

The technology sector is with no doubt a huge investment opportunity for investors. As the largest sector of the market, private equity and venture capital firms are happy to invest in tech companies who offer a continued stream of innovative products and services.

However, as our recent blog mentioned, insolvency has increased for businesses in software development, consultancy and related activities in the UK with a similar situation happening with tech businesses in the US and around the world. As a result, we are seeing a growing number of venture capital and private equity firms requesting software escrow agreements to protect themselves and their investments when investing in tech companies.

Software escrow or source code escrow is commonly used by companies to protect the source code of a developer or to protect the investment of the end-user. Over the years, software escrow vendors such as Escrow London have adapted themselves to improve upon their customers’ overall experience and turn it into a painless process.

If you are a private equity or venture capital firm investing in tech companies, now is the time to ask yourself whether your investment is protected if the tech firm were to go bankrupt. To help, here are our top 5 software escrow benefits to consider.

Investment Protection

If the tech company you are investing in ever enters into bankruptcy or any other insolvency situation and you don’t have access to the source code or data, you will essentially be waving goodbye to your investment. The cost of setting up a software escrow agreement is usually a small percentage of the overall cost of an investment in technology and in the event of a software vendor bankruptcy, you will be able to gain access to their intellectual property including source code and cloud environments for SaaS technology.

Having access to the intellectual property may allow you to recover some of your investment by either selling it or to take over the systems and provide a continued service to any paying clients.

Automated deposits ensure up-to-date data

A robust software escrow agreement should include automated source code deposits directly from the developer’s git repository. This will give you as the investor assurance that the deposit materials, such as source code, are always up-to-date.

Verification Testing

Verification testing provided by the software escrow vendor on a regular basis can ensure that the deposit materials are usable and the system is deployable and operational if ever a release were to happen. This will offer added protection to your investment.

Additional Security

Once the source code and other source materials have been deposited into software escrow, you will have peace of mind they are protected 24/7 by the software escrow vendor in the best possible way. This provides an additional layer of protection in the event of a ransomware or other hacker attack as the source code, data and other deposit materials will be held completely out of the grasp of any hacker.

Avoid costly disputes

In the event of a dispute with the tech company, having the source code in escrow can help avoid costly legal battles and allow you to continue using and maintaining the software should something happen to the software developer.

About Escrow London

Escrow London is a global SaaS escrow vendor headquartered in the United Kingdom. Our global coverage is provided across our London office, Escrow London North America Inc in Atlanta, and our Australian office in Sydney.

We have invested considerable resources into innovation to reinvent software escrow for a SaaS world. Escrow London provides a range of SaaS Continuity escrow solutions suitable for AWS, Microsoft Azure and Google Cloud hosted SaaS applications. We support a wide range of clients includes major law firms, banks, central banks, insurance companies, technology companies and government organisations.

Find out about SaaS Escrow by viewing our new video here.