We have a SaaS business (we host everything) where people, using our software, pay for various services offered by a few "vendors." We collect this money and every week we deposit the balance into the vendor's account. Our cut is a small piece from each of these service payments; so if nobody buys anything the vendor doesn't pay anything.
This model has worked fine, but we're now in talks with a larger vendor (government) that was asking for escrow for our service. They asked the trigger (for the release of the code) to be bankruptcy, not providing the service at a reasonable level (can't remember the actual term used), or acquisition by a third party.
We told them that we don't have a problem with the bankruptcy trigger, but the acquisition part we can not agree with because who would want to buy us if our customers have the option of just running our software for free. Are we rightfully concerned about this scenario?
After we mentioned that a trigger cannot be acquisition by a separate company or if they think our software doesn't live up to some standard, they countered that in this case they would want some kind of SLA with "really high requirements" instead of the acquisition or service trigger -- but still have the escrow for bankruptcy.
Doesn't SLA imply some kind of monthly or yearly service fee? We structured our model so that if a company does use our software they don't pay anything. We thought this would be preferred over a monthly/yearly fixed cost.
Are we being unreasonable? Thoughts?