Tag-Along Rights

TL;DR

The right of minority shareholders to join a sale by majority shareholders on the same terms, preventing 'cherry-picking' liquidity.

Tag-along rights protect minority shareholders. If a major holder (typically a founder or large investor) sells shares, tag-along holders can require the buyer to purchase a proportional amount of their shares on the same terms.

Without tag-along, a founder could sell secondary shares at a high price while leaving employees and small investors with no liquidity. Tag-along is a standard protection in modern term sheets.

Worked example

A founder negotiates a $4M secondary sale to a growth fund. The Series A investor's tag-along right lets them sell their pro rata share of the same shares at the same price — keeping founders from cashing out unilaterally.

Common pitfalls

• Triggering tag-along on small grants of secondary that complicate normal liquidity.
• Failing to define the tag-along threshold clearly.
• Ignoring tag in early SAFE side letters.

When this shows up in a pitch deck

Diligence content; not on the deck.

Related terms

• Drag-Along Rights — A provision allowing majority shareholders to force minority shareholders to participate in an approved sale of the company on the same terms.
• Right of First Refusal — The right of the company or existing investors to match any third-party offer to buy shares before the seller can transfer them externally.
• Secondary Sale — A sale of existing shareholder stock (founders, employees, or early investors) to a new investor, providing partial liquidity before an IPO or acquisition.
• Term Sheet — A non-binding document outlining the principal terms of a proposed financing, used to align investor and founder before legal documents are drafted.
• Preferred Stock — The equity class issued to investors, carrying special rights such as liquidation preference, anti-dilution protection, and protective covenants.

Use this in your next pitch deck

Deckmetric scores your pitch across 10 VC frameworks and against 8 investor types. Upload your deck for an instant analysis, or check the startup valuation calculator to benchmark your raise.