SEBI has notified final regulations for angel funds. I have noted many of these in the past, so for background:
In brief, angel funds are now only allowed as an “Alternative Investment Fund” which requires registration.
- Angel funds must pay Rs. 200,000 to register.
- Such funds can raise funds of at least 25 lakh (2.5 million) per investor, and a minimum corpus of Rs. 10 crores. (100 million)
- Can you be an angel investor? As an individual, you need to have a 20 million or 2 crore “tangible” networth apart from your primary residence.
- Also you need to either have had startup investment experience, have been a founder of more than one startup or have 10 years of experience as a senior management executive.
- Or if you’re a company, you must have a Rs. 10 crore (100 million) net worth.
- Angel funds cant invest in companies where control or management is with relatives of ANY angel investor. Relatives means [children, grandchildren , brothers, sisters] (and their spouses), or parents. Oh, and such people can’t be directors of any invested company either (before the investment) and cannot own more than 15% of equity.
- Funds must be raised within three years.
- Investments in any company must range from 50 lakh to 5 crores.
- And money is locked in for three years. This is strange but obviously overridable in case of an acquisition. (Come on, SEBI is not a dolt, they will grant permission in case that happens)
- You can’t have more than 49 investors in an angel fund.
Basically, the small investor is out of the ambit of these rules. Does that mean the small investor can’t invest? Of course he can!
Just get a convertible debt deal if you’re worried about startup tax. Or if you’re the real risk taking kind, at the small level (sub 50 lakh), don’t even bother about startup tax.