What escrow means in a digital business sale
Escrow is an arrangement in which an independent party holds funds on behalf of a buyer and a seller until both have done what they agreed. In a physical sale this might be the keys to a building. In an online business sale it is a long list of digital assets: repositories, domains, hosting, payment processor accounts, analytics, social profiles, supplier contracts, customer data and documentation.
The escrow provider does not judge whether the business is good. It follows instructions both sides agreed in advance. The buyer deposits funds, the seller transfers the assets, the buyer confirms receipt within an inspection period, and the provider pays the seller. If something goes wrong, the funds stay put until the dispute is settled under the escrow terms.
On Acquisitions, deals that use escrow go through an independent licensed escrow provider. Acquisitions itself never holds, receives or transfers purchase funds. The platform provides the listing, the NDA, the letter of intent tools and the handover checklist that both sides use to track the transfer.
Why licensing matters
Holding money for other people is regulated in most places. A licensed escrow provider is subject to oversight, keeps client funds separate from its own, and follows identity and anti-money laundering checks. Before you use any provider, confirm its license in the jurisdiction where it operates, and be wary of any counterparty that asks you to use a provider you cannot verify or to pay into a personal account.
1. Agree the deal in a letter of intent
Escrow follows a deal, it does not create one. Before any money moves, buyer and seller agree the price, what is included, the payment structure, the inspection period and who pays escrow fees. These points usually live in a letter of intent, followed by a purchase agreement. Our guide to the Letter of intent to buy a business covers the structure.
Write down the asset list in detail at this stage. Vague wording such as "the website and related accounts" causes most escrow disputes later.
2. Finish due diligence before funding
Due diligence comes before the deposit, not during the inspection period. The inspection period is for confirming that what you receive matches what was promised, not for discovering what the business is. Review verified revenue, churn, costs, code quality, data rights and legal documents first. The SaaS due diligence checklist lists what buyers typically check.
3. Open the escrow transaction
One side, usually the buyer, opens a transaction with the escrow provider. Both parties verify their identity, accept the escrow terms and confirm the key details.
- Purchase price and currency.
- Description of the assets being transferred.
- Length of the inspection period.
- Who pays the escrow fee, or how it is split.
- Any holdback, meaning part of the price kept back for a set time after closing.
Read the escrow terms yourself. They decide what happens if the other side does not respond or the transfer stalls.
4. The buyer deposits funds
The buyer sends the purchase amount to the escrow provider by the method it accepts, often a bank wire. The provider confirms receipt to both sides. Only after this confirmation should the seller start transferring assets. Never send money directly to the seller because of a last-minute request, and verify any change of payment instructions through a separate channel you already trust.
5. The seller transfers the assets
With funds secured, the seller moves the business to the buyer. In a digital sale this usually means a sequence of account changes.
- Domains moved to the buyer's registrar account, with the transfer lock and authorization code handled correctly.
- Code repositories transferred or cloned, with access for the seller removed.
- Hosting and infrastructure accounts transferred, or the application migrated to the buyer's own infrastructure.
- Payment processor account transferred, or subscriptions moved, depending on what the processor allows.
- Analytics, email sending, support desk and social profiles reassigned.
- Accounts with the AI model provider and other API suppliers, including new keys created by the buyer.
- Documentation, runbooks, supplier contracts and data exports delivered.
A shared handover checklist keeps both sides aligned. Each item is ticked off when the buyer confirms control, not when the seller says it is sent.
6. The inspection period
Once the seller marks the transfer complete, the inspection period starts. A few days to a couple of weeks is common for online businesses, depending on complexity. During this window the buyer checks that everything works in its hands.
- The application deploys and runs from the buyer's accounts.
- Revenue continues to flow into the buyer's payment account.
- Credentials work and the seller no longer has access.
- Data and content match what was described in due diligence.
If something is missing or broken, the buyer raises it with the seller and, if needed, with the escrow provider before the period ends. Silence at the end of the period usually counts as acceptance, so do not let the deadline pass by accident.
7. Release of funds
When the buyer approves, or the inspection period ends without a valid objection, the escrow provider releases the funds to the seller, minus any agreed fees and holdback. Both sides receive confirmation. If there is a holdback, it stays with the provider until its own release date or conditions are met.
8. Transition support
Most deals include a period in which the seller answers questions, helps with migrations and introduces the buyer to key suppliers or customers. This is usually agreed in the purchase agreement rather than in escrow itself, but a holdback can tie part of the price to it.
Escrow fees and timing
Escrow providers usually charge a percentage of the transaction amount, often with a minimum fee and lower percentages on larger deals. Bank wire fees may come on top. Who pays is negotiable; splitting the fee evenly is common.
Timing depends mostly on the transfer, not the provider. A simple content site can move in days. A SaaS product with many accounts, a payment processor migration and customer data can take several weeks. Plan the calendar so the inspection period does not overlap with holidays or a major product release.
Common escrow mistakes in online business purchases
- Starting the transfer before the provider confirms the deposit.
- Using a vague asset list that leaves room for argument.
- Treating the inspection period as due diligence.
- Forgetting accounts that matter, such as the AI model provider, email sending service or app store developer account.
- Letting the inspection deadline pass without checking everything.
- Accepting a change of payment instructions by email without verifying it.
- Moving revenue to the buyer without planning for customers whose subscriptions cannot move automatically.
Escrow scams to watch for
Fraudsters sometimes imitate escrow services. They set up a convincing site, propose it as a "trusted partner" and collect the buyer's deposit. Protect yourself with a few habits.
- Choose the escrow provider yourself, and verify its license with the regulator.
- Type the provider's address directly rather than following a link in a message.
- Confirm wire details by phone using a number from the provider's official site.
- Be cautious when a counterparty insists on urgency or refuses a licensed provider.
Escrow for AI businesses and domains
AI products add a few transfer items that classic websites lack: model provider accounts and usage limits, fine-tuned models, vector databases, evaluation sets and prompt libraries. List each one in the purchase agreement and in the handover checklist. Where a provider account cannot be transferred, the buyer opens its own and the seller helps migrate configuration and data.
Domain-only deals are simpler. The buyer deposits funds, the seller pushes or transfers the domain, the buyer confirms it is in its registrar account and funds are released. Buyers looking at AI domains for sale can expect a short inspection period.
Holdbacks and earn-outs
A holdback keeps part of the price with the escrow provider for a set time, for example to cover claims that the business was not as described or to secure the seller's transition support. An earn-out is different: it is a future payment tied to performance, usually handled in the purchase agreement and not always through escrow. Both reduce risk for the buyer and both should be defined in plain, measurable terms.
How escrow fits the deal route on Acquisitions
The deal route on Acquisitions runs from verified listing to NDA, offer and letter of intent, then due diligence, escrow and handover. Escrow is handled by an independent licensed escrow provider, so purchase funds never touch Acquisitions. Sellers on the List and Featured plans pay an optional success fee only on deals closed through the escrow route, and the Portfolio plan has no success fee. Details are on the pricing page.
FAQ
Not by law in most cases, but it is strongly recommended for any deal where meaningful money and assets change hands. It protects both sides from the risk that the other does not deliver.
It is negotiable. Buyers and sellers often split it, and the split is written into the letter of intent and the escrow terms.
From deposit to release, a simple site may take days, while a SaaS or AI product with many accounts can take several weeks. The asset transfer and the inspection period take most of the time.
The buyer raises the issue before the period ends. The parties try to fix it, and if they cannot agree, the escrow provider follows its dispute process. Funds stay held until the matter is resolved.
No. Acquisitions never holds, receives or transfers purchase funds. Escrow is provided by an independent licensed escrow provider, and Acquisitions is not a party to the funds flow.
Yes. Domain deals are among the simplest escrow transactions, with a short inspection period once the domain sits in the buyer's registrar account.
