Term sheet clause 10 of 25 · Control
Drag-along in a term sheet
In plain English: Lets a majority force all shareholders to join an approved sale. Typical: Triggered by board + majority of preferred (and sometimes common).
Founder-friendly
Requires founder or common majority approval.
Investor-friendly
Investor-only trigger.
What to watch for
Red flag
Low thresholds or drag at prices below preferences.
How to model it
Don't judge this clause by reading it; put numbers on it. In our workbooks it's modelled in Exit Waterfall (check who gets what in a drag), so you can see what it changes in your ownership or your payout before you agree.
Not legal advice. Norms vary by country and market cycle. Have a startup lawyer review your term sheet before you sign.