Come Along Rights
Come Along Rights, sometimes referred to as Tag Along Rights, empower investors with the option to sell their shares if a founder or key employee decides to sell theirs. This protective measure ensures that investors aren't left financially stranded if founders choose to exit, fostering fairness and aligning interests within startup investments.
What it Means:
Come Along Rights act as a safeguard for investors, offering them the right to join in a share sale initiated by a founder or key employee. This ensures that investors have the option to cash out in tandem with the founders, preventing a scenario where investors are compelled to hold their shares while founders exit.
How to Calculate:
Come Along Rights are not calculated in a numerical sense. Instead, they are contractual provisions agreed upon during investment negotiations. The terms outline the conditions under which investors can exercise their right to sell shares in coordination with founders or key employees.
Why Measure:
Measuring the impact of Come Along Rights is crucial for Indian founders in fostering transparency and trust with investors. It demonstrates a commitment to fairness and aligning interests, contributing to a positive investor-founder relationship. This measure becomes especially relevant during potential exit scenarios.
Examples:
Imagine an Indian startup where investors hold Come Along Rights. If a founder decides to sell a significant portion of their shares during an acquisition offer, investors with Come Along Rights can choose to sell their shares under the same terms and conditions. This ensures that investors aren't left with illiquid assets when founders cash out.
In this scenario, Come Along Rights protect investors from being trapped in an investment, providing them with the flexibility to align their financial strategies with the decisions made by founders or key employees.
In conclusion, Come Along Rights emerge as a key component of fair and transparent investment agreements for Indian founders. By incorporating these provisions, founders demonstrate a commitment to equitable treatment of investors, contributing to a positive and collaborative investment ecosystem in the dynamic landscape of Indian startups.