1. A legal arrangement in which a third party holds a large sum of money until conditions are met– at which point the monies are disbursed to the intended party.
In startup investing land, this means that a third party holds the actual investment money until closing conditions (such as meeting the minimum for a raise) are met. Before these conditions are met, an investor can withdraw their investment.
2. Limbo for funds.
Example sentence: After investing in SunSipz (the very first startup I invested in), I panicked when I saw my investment was in escrow! But then I realized that was just the waiting room for my monies and that, once the raise ended successfully, the company would actually get the funds.