What Is A 'Drag-Along'?

You've just received a term sheet for your Series A financing, and it mentions a "drag-along." What does this mean, and should you be concerned about it?

In its simplest terms, a "drag-along" is a contract term requiring stockholders to vote in favor of the sale of the company under certain conditions and otherwise cooperate with the sale process – in other words, it allows certain parties to "drag" other stockholders to support such a transaction. Drag-along provisions have become common, though not universal, in venture financings of Delaware-incorporated companies, especially after the Series Seed stage, and are nearly universal in other non-US jurisdictions where 100% of a company's stockholder base must be party to a sale transaction.