SEBI relaxes investment rules for angel investors

By Raaghav G R

Posted on January 6, 2017

To encourage angel investors to invest on startups, SEBI has relaxed its investment rules. Angel investors can now invest on startups that are upto five years old. The lock – in period for angel funds has been slashed from three years to one year and the minimum investment threshold has been slashed from Rs. 50 lakhs to Rs. 25 lakhs. Angel funds are allowed to invest in overseas venture capital undertakings up to 25% of their investible corpus in line with other AIFs. The upper limit on the number of angel investors in a scheme has been increased to 200 from 49. SEBI has made an amendment to its Alternative Investment Funds Regulations, 2012. Angel investors can now invest on startups that are upto five years old when previously; they were allowed to invest on startups that were upto three years old. Read more on Angel Investors

Angel fund is a sub – category of AIF. Angel investors encourage entrepreneurship in the country by funding startups in their ‘seed stage’ who would otherwise find it difficult to obtain funds from traditional sources such as banks at that stage. Angel investors offer mentorship to entrepreneurs apart from access to their own business networks. Currently, 266 AIFs are registered with SEBI, of which, 84 are registered under Category 1.

India is a country which has an abundance of youthful talent in every field. There are many innovative startups in India which provide essential services to the society. They just need funding, mentoring and incubation during their seed stage to become MNCs and globally recognized countries. SEBI has taken the right move in this regard. By reducing the lock – in period and minimum investment threshold for angel investors, it is encouraging them to invest on startups. Startups will now easily get access to angel funds in their seed stage. Lack of funding will now not be a reason for failure of startups in India. Hopefully the Indian startup bubble will bounce back in the future thanks to this move by SEBI. Read more on Startup News

SEBI relaxes investment rules for angel investors