The Securities and Exchange Board of India (SEBI) on Wednesday (Nov. 12) proposed revisions for angel funds regulation, including lowering investment limits and widening the range of eligible investors to boost startup funding but sought stricter scrutiny of these investors.
Angel Funds are a category of venture capital funds that channel investments into start-ups, primarily from Angel Investors. As of March 31, 2023, 82 angel funds were registered with SEBI, with total investor commitments of 70.53 billion rupees ($836.10 million) and investments of 33.43 billion rupees.
By cutting the minimum investment from 2.5 million to 1 million rupees and increasing the maximum to 250 million rupees, the regulator aims to make investing more accessible and scalable.
Eligible investors include Hindu undivided families (HUFs), family trusts, and sole proprietorships, corporations, and individuals with five years of experience, who must be accredited by an external independent agency. However, the number of investors for any single company will be capped at 200.
Additionally, the regulator has proposed allowing only “accredited investors” to invest in angel funds, looking to rationalise their fundraising processes, strengthening disclosure as well as governance requirements and providing operational clarity and investment flexibility.
SEBI is inviting public feedback until Nov. 28 before finalizing rules, giving existing funds one year to comply.
“It would be very beneficial for the ecosystem to relook at at how angel funds should be run” Anand Lunia, founding partner at venture capital firm India told Times Of India.
The review by Sebi follows the recent Budget announcement of abolishing the angel tax.
