Why it matters
Co-sale rights (also called tag-along) exist so that if a major holder sells, smaller holders can ride along on the same terms. Used symmetrically, this is fair: nobody gets a private exit at someone else's expense. Used asymmetrically — only investors get to tag onto founder sales — it caps your liquidity at the worst possible moment. If a strategic acquirer wants to buy 20% of founder shares to align you, the investor can force a pro-rata reduction. If the investor sells to a secondary fund at a premium, you have no right to participate.
How to negotiate
Make it mutual: any major holder selling above a threshold (e.g. 1% of fully-diluted) triggers co-sale rights for all other major holders. Carve out routine secondary sales below a small threshold (founders should be able to sell modest amounts for liquidity without dragging a process). Carve out estate-planning transfers and bona fide gifts.
Example language
How this clause typically appears in a term sheet. Read it carefully — predatory language is often buried in routine paragraphs.
In the event any Founder proposes to transfer shares of Common Stock, the Major Investors shall have the right to participate in such transfer on a pro-rata basis. No corresponding co-sale right is granted to the Common Stockholders in respect of transfers by the Investors.
TURNSHEET provides intelligence, not legal advice. This page describes typical market behaviour and common negotiation tactics; your specific deal may have nuances that change the analysis. Always review your term sheet with qualified legal counsel before signing.