Angel Investment Finally Got Some Repair Done

Just 350 – Yes, that’s what approximately total number of angels world’s third largest start-up ecosystem - India, has got. The US, the world’s largest, has around 300,000 angels and around 400 active angel groups. To even think of aiming for that sort of robustness, we categorically need not just more angels but higher flexibility in their ability to raise funds, invest in various stages for portfolio and geographical diversity, and less restriction in carving their exit strategies. The recent changes in the angel fund regulations can be the inflection point for bringing that robustness.

- Sandeep Soni

Securities and Exchange Board of India (SEBI) in March 2015 constituted a standing committee called Alternative Investment Policy Advisory Committee (AIPAC) steered by Infosys co-founder, Narayana Murthy, to advice the market regulator on how to augment the further development of the alternative investments and start-up ecosystem in India. This included the Alternative Investment Funds (AIF) category I that also houses angel and venture capital funds but exclude funds like private equity, debt, hedge, and fund of funds.

Low Deal Size, High Volume

Out of the five amendments announced by SEBI in November last year,the two most impactful of them have been first, allowing investments in start-ups incorporated within five years and not three years. This will trigger more investments to happen in companies that need capital after three years of bootstrapping.

“SEBI wanted to keep it to three years. Our experience is, in general most investors often find it difficult to invest Rs 25 lakh over a period of three years as they may not come across an investment opportunity that interest them,” says Saurabh Srivastava, Chairman, Indian Angel Network (IAN). Srivastava is among the 24-member AIPAC.