Introduction
- Angel fund is a money pool created by high-net-worth individuals or companies (generally called angel investors), for investing in business start-ups.
- They are a subcategory of venture capital funds with a special focus on startups, whereas venture capitalists generally invest at a later stage of the development of the company.
Features of Angel Fund
- Angel funds can raise funds only by issuing units to angel investors which should have a corpus of at least a hundred million rupees.
- Angel funds can accept investment from maximum 200 investors, earlier it was limited to 49 investors.
- Minimum investment amount in angel funds is Rs. 25 lakhs; earlier it was Rs. 50 lakhs. The maximum amount of investment cannot exceed Rs. 5 Crores.
- Lock in the period required for Angel investors is reduced from 3 years to one year.
- AIF are allowed to make investments in organizations incorporated in the previous 5 years. Previously, this incorporation limit was set at 3 years.
- Angel funds can make investments only in investee companies that:
- Are incorporated in India and should not be more than 3 years old.
- Have a turnover not exceeding Rs. 25 crore.
- Are unlisted.
- Has no family connection with the investors who are going to invest in the company.
Regulation of Angel Funds
- In India, Angel Funds are defined under SEBI (Alternative Investment Funds) (Amendment) Regulations, 2013.
- Under this regulation, the Angel fund is defined as a sub-category of Venture Capital Fund under Category I- Alternative Investment Fund (AIF) that raises funds from angel investors.
Angel Investors
- Angel investors are experienced and well-established investors who have an insight of the industry.
- These angel investors can be individuals or companies with high net worth.
- Angel investors provide the much-needed support in the initial stages of the business.
