Working with startups and scale-ups offers innovation and flexibility. At the same time, they entail specific legal risks: limited continuity, rapid changes, limited financial resources, and sometimes incomplete IP rights. In our practice, we advise Dutch clients who become dependent on startup suppliers. With a few targeted clauses, you avoid operational dependency and capital loss.
What is the legal problem?
Startups often have limited solvency, limited legal protection, and can pivot, merge, or go bankrupt more quickly. Their IP position may be incomplete due to investor agreements or co-founder disputes. Liability coverage is limited. In international collaboration, these risks reinforce each other. A standard contract with an established party is insufficient.
What does the law say?
No specific law governs startup contracts. General contract, IP, and competition rules apply. For IP transfer in startups, a proper assignment trail from founders to the company is essential under Section 2 of the Copyright Act and Section 12 of the ROW. In the event of bankruptcy, international insolvency rules apply (Regulation (EU) 2015/848). Section 37 of the Dutch Bankruptcy Act governs the position of the bankruptcy trustee. For escrow of source code and data, there are specialized providers such as Stichting Software Borg and international standard contracts. What risks do companies face? Bankruptcy of the startup during the project leads to stagnation, data loss, and legal battles with bankruptcy trustees. IP that has not been correctly transferred by founders can be claimed after their departure. Limited insurance makes limitation of liability less valuable. Rapid changes in management or strategy can undermine the collaboration. Investors can claim rights that affect your position.
Practical example from our practice
We represented a Dutch company that used a SaaS product from an Israeli startup. The startup failed to secure a subsequent investment round and closed within three months. Our client's data was partially lost. Upon renegotiating the contract with the successor SaaS provider, we incorporated the following: SaaS escrow with Stichting Software Borg, data portability in CSV and JSON, a step-in right in the event of bankruptcy, and a 90-day exit transition. This is essential for strategic SaaS from startups.
What can you do?
Conduct financial due diligence on the startup. Implement escrow for data and source code. Arrange step-in rights in the event of bankruptcy under Section 37 of the Dutch Bankruptcy Act (Fw). Require an IP assignment trail from founders to the company. Agree on change of control rights. Keep contracts short and revisable. Combine with a down payment or milestone payment to spread risk. See also our article on Escrow arrangements for international transactions.