For boosting startup funding, SEBI has relaxed rules for investment by angel funds, permitting them to invest in up to 5-year-old entities.
The lock-in requirement has been reduced from three to one year for angel funds and their minimum investment threshold has been slashed to INR 25 lakh.
Upper limit for number of angel investors in a scheme will be increased from 49 to 200 in a notification dated Jan 4, 2016.
Regulatory SEBI has made an amendment to SEBI (Alternative Investment Funds) Regulations 2012 following which the definition of startup for angel fund investments are similar to DIPP. As given in their startup policy.
Angel funds can invest in startups incorporated within 5 years, which was earlier 3 years.
To diversify risks, SEBI has also permitted angel funds to make overseas investments up to 25 percent of their investible corpus in line with other AIFs/ Alternative Investment Funds.
Angel Fund, a subcategory of AIF encourages entrepreneurship in the country by financing startups at a stage when firms find it difficult to obtain capital from traditional sources of finance such as banks and financial institutions.
Currently, 266 AIFs are registered with SEBI of which 84 are registered under Category 1. Angel Investors fund startups in their seed stage.
Angel investors generally make early-stage investments and highly risky bets in the start-up universe, but are essential to these companies’ growth trajectory.
The amendments are part of SEBI’s larger efforts to encourage young entrepreneurship in the country, and provide founders with access to private and eventually public funds.