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Angel funds can now spread wings beyond just-born start-ups

Our Bureau Mumbai | Updated on January 12, 2018 Published on January 05, 2017

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SEBI tweaks rules further for funding start-ups

Angel funds can invest in start-ups that are up to five years old, following the the latest relaxation of rules for investments in start-ups by the market regulator Securities and Exchange Board of India (SEBI).

In its latest circular, SEBI has made more new-age companies eligible for investments by angel investors by having them comply with “the criteria regarding the age of the venture capital undertaking/start-up issued by the Department of Industrial Policy and Promotion,” which is five years.

The circular amends the SEBI (Alternative Investment Funds) Regulations, 2012.

The minimum tenure of angel funds’ investments in start-ups has also been lowered from three years to one year. The minimum size of an investment has also been lowered to ₹25 lakh from ₹50 lakh.

The new rules also allow such funds to invest in overseas venture capital undertakings up to 25 per cent of their investible corpus in line with other AIFs.

The upper limit for the number of angel investors in a scheme has been increased from 49 to 200.

Angel funds are a kind of alternative investment fund whose functioning is regulated by SEBI. 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.

As part of this exercise, SEBI is being advised by a committee of experts involved in this universe, under the leadership of NR Narayana Murthy.

Published on January 05, 2017
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