The Indian Start-up ecosystem has come a long way, with many start-ups going public and nearly 42 companies becoming unicorns in 2021. According to Inc42’s Indian Tech Start-up Funding Report 2021, Indian start-ups raised $42 Billion in funding across 1,583 deals in 2021, and 2,487 unique investors participated in start-up funding.

Most of these investments take the route through the Alternative Investment Fund (AIF), such as Venture Capital Funds, Angel Funds, and Private Equity Funds.

AIF is defined under regulation 2(1)(b) of the SEBI (Alternative Investment Funds) Regulations, 2012 as follows:

It is a privately pooled investment vehicle that gathers funds from investors, including Indian and foreign investors, to invest it as per a defined investment policy to benefit its investors.

Registration Process:

Categories of AIFS:-

Angel Funds vs Other Funds

Particulars

Angel Funds

Other Funds (VC & PE)

SEBI Registration Fees

Rs.2,00,000

Rs.5,00,000 to INR 10,00,000

Ability to Invest in Listed Securities

Can invest in Listed Start-ups

Limited listed investments allowed. Different norms for different subcategories

Minimum Corpus for each AIF Scheme

Corpus of at least Rs.5 crores

Corpus of at least Rs.20 crores

Min investment required by Investors

Invest at least Rs.25 Lakhs

Invest at least Rs.1 Crore

Investment Period

Maximum 5 years

Minimum 3 years

Prohibition of Listing

Units of angel funds shall not be listed on any recognized stock exchange.

NA

Number of Investors

200 investors

1000 investors

Continuing Interest by Sponsor/Manager

Lower of following amounts: - 2.5% of corpus or

- Rs.50 lakhs

Lower of following amounts:

- 2.5% of corpus or

- Rs.5 crores

Restriction on Investments

Angel funds shall invest only in start-ups that:

- have been incorporated during the preceding three years from the date of such investment

- are not promoted or sponsored by or related to an industrial group whose group turnover exceeds three hundred crores rupees

- are not companies with family connections with any angel investors investing in the company

- Angel funds shall not invest more than twenty-five percent of the total investments under all its schemes in one venture capital undertaking

No such restrictions.

Particulars

Angel Funds

Other Funds

Filing of Term Sheet

Required to file with SEBI subject to which angel fund may launch schemes

Not Required

Prohibition of Listing

Units of angel funds shall not be listed on any recognised stock exchange.

Not Required

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Authors:

Urvesh Shah

Associate Consultant | +917900046908 | urvesh.shah@masd.co.in |LinkedIn profile

Bhavya Shah

Associate Consultant |+918104954747| bhavya.shah@masd.co.in|LinkedIn profile