Escrow

Escrow is the practice of holding money (or an asset) with a neutral third party or a smart contract until agreed conditions are met, at which point it is released. It protects both sides: the payer's funds are not handed over until the deal actually happens, and the recipient knows the money is real and committed.

In a tokenized raise, escrow usually means investor funds are held - often in a smart contract - during the primary issuance rather than going straight to the issuer. The funds are released to the issuer only when the raise succeeds (hits its target by the fundraising deadline), and returned to investors if it fails. On-chain, this can be enforced automatically by the funding contract.

For an investor, escrow is a meaningful protection. It means your money is not spent before the offering is real, and a failed raise returns your funds rather than leaving them stranded. When evaluating a deal, it is worth knowing whether funds are escrowed and under what release conditions.

For an issuer, escrow builds trust and is often expected or required: investors are far more comfortable committing when they know funds are held safely until close. The terms - what triggers release, what triggers a refund - are typically set in the subscription agreement and, in a tokenized raise, mirrored in the contract that holds the funds.