SEBI Provisions Relating To Alternative Investment Funds in India Before the introduction of th...
Angle Funds are funds where the money is pooled in by investor’s termed as ‘Angels’. This pooled amount is then invested into startups in sizable amounts, this provides the investors better negotiating powers.
In India, Angel Funds are covered under the umbrella of Category I of Alternative Investment Funds which are regulated by Securities Exchange Board of India (Alternative Investment Funds) Regulations, 2012. Under Category I Angel Funds are summed up with venture capital funds, SME funds, social impact funds etc.
Angel investors are experienced and well-established investors who have an insight of the industry. In general course of business, normal venture equity funds or equity funds are not interested in committing their funds to start-ups and businesses in their formative stages. This is because there is no surety or track record regarding the returns from such startups. In such situations, Angel Investors play a key role as they undertake such startups with their funds as well as trust.
These angel investors can be individuals or companies with high net worth. While venture capital funds focused on investing in later stages of business, angel investor provides the much-needed support in the initial stages of the business.
In recent years, Securities Exchange Board of India has amended its Alternative Investment Fund (AIF) regulations through SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, introducing certain relaxations for angel funds, thus providing them an easier passage for operation.
Under AIF Regulations Angle Funds can be set up and they will have following key features:
Legally Angel Funds are regulated by AIF Regulations. As per these regulations, Angel funds Investors will be an investor willing to invest in Angel Funds and can be any of the following:
Following are the points of difference between the two categories: