Angel funds may soon get to invest more in startups boosting system
Angel funds are likely to get a bigger play in the coming days. These pooled vehicles could be given the opportunity to take larger bets on startups whose early-stage plans they bankroll.
The government and the capital market regulator may take a relook at the maximum investment that an angel fund can make in a single company. At present the investment limit, capped at ₹10 crore, may be at least doubled, according to fund and startup industry circles.
«The early-stage seed and pre-seed investments from VC funds have almost dried up and the number of new startups has dramatically reduced.
It is important to channelise more angel investments by increasing the limits of the angel funds from the current ₹10 crore to at least ₹25 crore. This will help towards reigniting the startup ecosystem,» said Mahendra Swarup, chairman of the Startup Association of India and founder of Ankurit Capital, a category-1 fund.
Final call on the matter would, however, have to be taken by the Securities & Exchange Board of India, said Swarup who is aware of deliberations and representations on the matter.
Angel fund is a sub-category of VC funds under alternative investment funds (AIFs) which are regulated by Sebi. Unlike other AIFs, which are typically blind-pool funds, angel-fund managers follow a deal-by-deal structure, raising money by showcasing a specific company and investment opportunity to investors.
The manager shares deal-specific term sheets with the regulator and investors who are allowed to make a soft commitment and retain a degree of investment discretion, deciding whether to invest on a deal-by-deal basis. However, the fund sponsors are bound by fiduciary obligations including ensuring transparency and uniformity of
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