Should you ask for an LOI before discussing your data in detail?

When does an LOI make sense in a data deal?#

A letter of intent makes sense once a buyer's questions move from what records you have to what those records look like inside. Early conversations about record families, systems, years of history and approximate volume are metadata, and they rarely justify formal paper beyond a mutual NDA.

The picture changes when a buyer asks for sample tickets, a schema export, field-level descriptions or access to a data room. At that point your team is spending real time, and the material shared would tell a competitor how your operation works. Written proposed terms protect that effort and show whether the deal you are preparing for is the deal the buyer intends.

Acquirers and investors routinely sign an LOI or term sheet before deep diligence. Data licensing borrows the same logic for the same reason: both sides should agree on the shape of the deal before the expensive work begins.

What to share at each stage, and what paper to have first#

Disclosure should step up with commitment. The table below is a practical sequence that a CFO and general counsel can agree on before the first buyer call, so nobody improvises under pressure.

The sequence also protects the buyer. A supplier that holds firm on paper before samples tends to be one that will hold firm on rights and preparation later, which is what a careful buyer wants from the records it licenses.

What a data licensing LOI should include#

A useful data licensing LOI is short and specific. It does not need final prices, but it should describe enough of the deal that your team can judge whether preparation is worth the effort.

• 1Parties: the exact supplier entity that holds the records and the buyer entity that will sign the license.
• 2Scope: record families, source systems, date ranges, approximate volume and stated exclusions.
• 3Permitted use: training, evaluation, fine-tuning or internal research, and any limits on derived models or outputs.
• 4Prohibited use: re-identification, resale or sublicensing, and any restricted fields or applications.
• 5Exclusivity: whether any is requested, by field, geography or time, and what it would cost the buyer.
• 6License term, renewal and what happens to delivered records when the term ends.
• 7Economic structure: fixed fee, staged payments or refresh payments, with amounts stated as ranges or to be agreed.
• 8Preparation: who removes personal and confidential details, who bears that cost and what acceptance looks like.
• 9Delivery: secure transfer, encrypted drives or access within the supplier's own environment.
• 10Conditions: rights review, board or lender consents and any customer approvals.
• 11Binding provisions: confidentiality, any exclusive negotiation period, costs and governing law.

Which LOI terms are binding?#

Most LOIs state that the commercial terms are non-binding and that only named clauses bind the parties. Confidentiality, an exclusive negotiation or no-shop period, responsibility for costs and governing law are the clauses most often made binding. Read the binding list first, because that is where the real obligations sit.

The most expensive mistake is agreeing to an exclusive negotiation period before your own rights review is done. If customer contracts later rule out half the scope, you may be locked out of other conversations while the deal is renegotiated. Keep any exclusive period short, tie it to the specific record families described and make it end automatically if conditions fail.

Also confirm that the LOI does not grant any use right in records shared during diligence. Samples are for evaluation only, and the LOI or NDA should say so. This is general information rather than legal advice; have counsel review any LOI before it is signed.

What if the buyer will not sign an LOI?#

Some buyers prefer to see samples before committing to anything in writing. A workable middle path is to ask for an outline of proposed terms by email, clearly non-binding, covering intended use, rough scope and the economic structure.

Pair that outline with small, redacted samples under an NDA that forbids training on them, requires deletion on request and limits who at the buyer can see them. If the buyer resists describing its intended use even informally, treat that as a reason to slow down rather than a hurdle to work around.

Keep a short log of what was shared, with whom and when. If the conversation stalls, that log supports a deletion request, and if it advances, it becomes the starting point for the disclosure schedule in the license.

Red flags in a buyer's proposed terms#

Red flags in proposed terms are clauses that shift risk or value to the buyer before the supplier has done its own review. Spotting them at the LOI stage is far cheaper than negotiating them out of a signed license.

None of these clauses automatically ends a conversation. Each is a prompt to ask why the buyer needs it and to propose a narrower version that still meets the buyer's stated purpose.

Illustrative: a freight brokerage answers an inbound request#

Illustrative: a fictional freight brokerage runs McLeod for loads and a shared inbox for carrier exceptions. A model developer contacts the CEO asking for a sample of exception records and the related email threads.

The CFO replies that the company is open to a conversation and asks for proposed terms in writing first. The buyer sends a short LOI: exception notes and resolution records across several years, use for evaluation and training, no exclusivity, payments staged to delivery, and binding confidentiality. Counsel strikes a clause that would let the buyer keep samples if no deal is signed and adds a condition that shipper contracts are reviewed first.

Samples move only after the LOI is signed. The rights review later excludes records for shipper accounts whose contracts restrict reuse, and because the LOI tied scope to that review, the change does not reopen the whole negotiation.

How SourceX sequences terms and disclosure#

SourceX keeps disclosure behind commitment. In the SourceX five-step transaction, the Supply step uses a metadata-only fit check, buyer terms are reviewed before any records move, and the supplier approves every step. SourceX has no price list; economics are known only once a buyer engages with a specific scope.

The SourceX Evidence Packet records permitted use and release authorization for the final package, so the license that is signed reflects what was proposed and approved, and the supplier keeps ownership of its records because they are licensed, not sold.