In a seed round, the shareholders agreement is where much of the future relationship is decided, even if the company is still small. The investor’s goal is usually to protect their investment and ensure clear exit rules. The founding team’s goal is to preserve operational agility and avoid getting blocked on day-to-day decisions. Good negotiation is not about “winning” every clause, but about setting reasonable protections with clear thresholds, so that governance does not become an obstacle.
Three concepts tend to concentrate the tension: vetoes, drag-along, and tag-along. A veto is a right to block decisions. It is legitimate when applied to extraordinary matters that could change the value of the investment, but harmful if it creeps into micromanagement. Drag-along is the rule that allows a majority to force the rest to sell if an offer appears, preventing a minority shareholder from blocking an exit. Tag-along protects minority shareholders by allowing them to sell on the same terms if the majority shareholders sell.
Before negotiating, it helps to have a simple criterion: operational matters are decided quickly, structural matters are decided by consensus. That criterion translates into thresholds and closed lists. If you accept vetoes, make sure they apply to a short list of subjects and always with quantitative thresholds. For example: debt above an agreed amount, sale of essential assets, capital increases, change of business activity, dividend distribution, or hiring key people with out-of-range compensation. On the other hand, vetoes over detailed budgets, ordinary hiring, or commercial decisions are a warning sign: they turn the investor into a de facto manager.
On drag-along and tag-along, the danger usually lies in the percentages and conditions. A reasonable drag-along requires a qualified majority — for example, a high percentage of capital — and that the sale be to a third party at market conditions. It is also common to require a minimum price or that the investor reach a minimum return, but at seed stage this must be balanced so as not to block a real exit opportunity. Tag-along must guarantee that, if a sale happens, everyone can sell proportionally and on equal terms, avoiding “two-speed” sales.
Finally, put two safeguards in writing: that any veto list is closed, and that every “material” term has a numerical definition or examples. Agility is not defended with words — it is defended with thresholds. This way the investor is protected on what matters and the company retains the ability to execute, which is ultimately what grows the value of the investment.
The professional support of the Oficina Económica de Galicia can make a difference when launching an initiative. Access their free advisory service and make the most of the tools available.
