SEBI eases rules for angel funds

November 24, 2016

The Securities and Exchange Board of India (SEBI) has liberalised norms for angel investors to invest in early-stage entities.
In this regard, SEBI in its meeting decided to amend the SEBI (Alternative Investment Funds) Regulations, 2012.
This decision was taken based on the recommendations received from the NR Narayana Murthy Alternative Investment Policy Advisory Committee.
Decisions taken by SEBI

Increased the upper limit for number of angel investors in a scheme from 49 to 200.
Angel Funds will also be allowed to invest in start-ups incorporated within 5 years instead of the earlier norm of 3 years.
The requirement of minimum investment amount by an angel fund in any venture capital undertaking has been reduced to Rs. 25 lakh from earlier Rs. 50 lakh.
The lock-in requirements of investment made by angel funds in the venture capital undertaking has been reduced to one year from three years.
Such funds also have been allowed to invest in overseas venture capital undertakings. It will be up to 25% of their investible corpus in line with other Alternative Investment Funds (AIFs).

Benefits

This move was taken as part of its attempts to facilitate fund-raising for start-ups and help to boost investment in the early stages for start-ups in the country.
It will benefit start-ups looking for raising venture funding not just for the money but for the other value addition.
It will help start-ups raising money from a venture capital firm brings such as direction and mentorship from seasoned investors.

What is an Angel Investor?
Angel investors invest in small startups or entrepreneurs. These investors are often among an entrepreneur’s family and friends. The capital provided by angel investors to these startups may be a one-time investment to help them to propel their business or it may ongoing injection of money to support and carry starup through its difficult early stages.

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