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Ask HN: Large client demands our code be given to a trustee

We're a small startup, providing a whitelabel SaaS. A large potential client demanded that a copy of our source code would be entrusted to a third party (attorney) to be released to them only in case our company goes belly up. We have reservations about code not being under our control. Has anyone experienced something similar? What are the risks? Could they be mitigated?

ranaway 10y ago
I've seen that being required of very small software houses selling to bluechip corporations. There are professional services like Iron Mountain that specialize in code escrow. I'm not a fan of it, it's a stupid idea frankly. But it does exist in the wild.
chollida1 10y ago
This is a perfectly normal request and also perfectly reasonable. They'll also expect very clear steps on how to install it and get it running. Consider the scenario from the clients perspective. They are being asked to base a portion of their lively hood on a small company. They just want to make sure they can continue to function if you get bought and shuttered, or go bankrupt. I'm not sure what reservations you'd have. I mean a trustee's entire value is in their reputation, so if they give away your source code they are done. I'm going to guess your source code isn't what some lawyer wants to end their career on. Maybe turning the question on its head, what possible reservation would you have with this?
- throwaway32123 10y ago
  Basic reluctance for someone having some 'claim' on our code, that could potentially legally limit us in the future. Perhaps future investors would have reservations?
  - ramtatatam 10y ago
    It depends on how this is put together in your contract with this customer. Escrow should be treated as insurance rather than claim - your work is not (or at least should not be) made available to this customer, it's with trusted party.
    - throwaway32123 10y ago
      Thanks!
csixty4 10y ago
This is pretty standard for dealing with enterprise clients. They literally just want a copy of your code in escrow so they're not left hanging if you go out of business. They usually pay the escrow costs and you ship a CD-ROM or something. In my experience, this just happens once and nobody thinks to ask for updates once it's done.
deleted 10y ago
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ramtatatam 10y ago
Hey, it's good problem to have, especially if you are a small startup :-) That means there is probably enough interest in you for those big guys to build something serious on top of your product. If I was CIO or anything else at exec level I would not continue with you until your code went through proper escrow (not only 3rd party storage but also 3rd party audit) - this is reasonable, especially if you plan to base some high-revenue plans on new product. You will be fine as long as you have other customers and your survival is not dependant on that particular customer. If you are unsure here then you might be better to ask their intentions and if these are very serious maybe they will buy you off and save the hassle :-)
deleted 10y ago
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ranaway 10y ago

I've seen that being required of very small software houses selling to bluechip corporations. There are professional services like Iron Mountain that specialize in code escrow. I'm not a fan of it, it's a stupid idea frankly. But it does exist in the wild.

chollida1 10y ago

This is a perfectly normal request and also perfectly reasonable. They'll also expect very clear steps on how to install it and get it running. Consider the scenario from the clients perspective. They are being asked to base a portion of their lively hood on a small company. They just want to make sure they can continue to function if you get bought and shuttered, or go bankrupt. I'm not sure what reservations you'd have. I mean a trustee's entire value is in their reputation, so if they give away your source code they are done. I'm going to guess your source code isn't what some lawyer wants to end their career on. Maybe turning the question on its head, what possible reservation would you have with this?

throwaway32123 10y ago
Basic reluctance for someone having some 'claim' on our code, that could potentially legally limit us in the future. Perhaps future investors would have reservations?
- ramtatatam 10y ago
  It depends on how this is put together in your contract with this customer. Escrow should be treated as insurance rather than claim - your work is not (or at least should not be) made available to this customer, it's with trusted party.
  - throwaway32123 10y ago
    Thanks!

csixty4 10y ago

This is pretty standard for dealing with enterprise clients. They literally just want a copy of your code in escrow so they're not left hanging if you go out of business. They usually pay the escrow costs and you ship a CD-ROM or something. In my experience, this just happens once and nobody thinks to ask for updates once it's done.

deleted 10y ago

[deleted]

ramtatatam 10y ago

Hey, it's good problem to have, especially if you are a small startup :-) That means there is probably enough interest in you for those big guys to build something serious on top of your product. If I was CIO or anything else at exec level I would not continue with you until your code went through proper escrow (not only 3rd party storage but also 3rd party audit) - this is reasonable, especially if you plan to base some high-revenue plans on new product. You will be fine as long as you have other customers and your survival is not dependant on that particular customer. If you are unsure here then you might be better to ask their intentions and if these are very serious maybe they will buy you off and save the hassle :-)

deleted 10y ago

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