The Securities and Exchange Board of India (SEBI) recently reported that, till March 31, 2024, 82 registered Angel Funds had secured a total investment commitments of ₹ 7,053 crore. Of this, 3,343 crores had already been deployed in the startup.
Understanding Angel Fund
Angel Fund is a category of alternative investment funds (AIF) in India, especially classified under Category I. These funds play a role in providing financial resources to new businesses, to support the initial stage startups from Pool Capital.
Recent regulatory development
In November 2024, SEBI proposed several amendments in the regulatory structure for Angel Fund to increase its structure and appeal:
Investment limitations: The proposed changes suggest that the minimum investment is to set ₹ 1 million and maximum ₹ 250 million per startup. Its purpose is to provide greater access to fairy investment and scalability.
Investor Eligibility: SEBI has recommended restricting participation to recognized investors with essential financial expertise and risk tolerance. It is to ensure that investors are sufficiently prepared for the risks associated with the initial stage investment.
Lock-in period reduction: The proposal to reduce the lock-in period from one year to six months wants to improve liquidity for investors.
Growth trajectory and economic impact
The Indian Startup Ecosystem has experienced a continuous growth, with private equity and enterprise capital investment to reach $ 31.5 billion in the first half of 2024 – an increase of 8% compared to the same period in 2023.
The proposed regulatory changes expect to attract a wide range of investors and increase capital availability for startups. By reducing obstacles in entering and increasing the flexibility of investment, these measures aim to further strengthen India’s startup ecosystem.
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