Drag along and tag along rights. These two terms relate to the minority shareholders in a company in the event of a sale or agreement to merge or close the company. Usually a VC fund would not be a minority shareholder as it would've taken a more sizable investment in a company. Thus, it may want these rights on the term sheets to help ensure a swift exit of the company at the given time, rather than minority shareholders holding the process up.

Drag along rights are an example of this. Drag along rights is a provision that allows the majority shareholder to force the minority shareholders to agree to the terms of a merger, acquisition, or liquidation events in the future. The provision prevents a future situation in which a minority shareholder may in any way be able to undermine the liquidation event that was already approved by the majority shareholders with drag along rights. The majority investors would have the legal right to drag along the minority shareholders to the transaction.

For example, if the startup wanted to sell itself to an outside acquirer, the minority shareholders would not be able to block the sale tag along. Rights are different. Tag along rights is a form of protection for the minority shareholders that gives them a legal right to tag along with the majority shareholders or have their shares acquired in the same terms as the majority. If otherwise, they were to be excluded, this may slow down a potential sale as the terms would have to cover the minority as well as the majority shareholders.