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Can someone (Alok sir?) explain the new SEBI guidelines for angel investing?

By Brijesh Bharadwaj on 12 Comments / 2915 views

 

SEBI released some guidelines for angel investing, with a lot of vague clauses, it would be great if anyone can clarify them in simple words.

Link : https://www.nextbigwhat.com/sebi-angel-funds-297/

The proposed regulatory changes to Angel funds in India have been officially announced by market regulator Sebi. In a statement on Tuesday, the Securities and Exchange Board of India released the framework for registration and regulation of angel pools under a sub category ‘Angel Funds’ under Category I- Venture Capital Funds.

A gist of SEBI Guidelines for Angel Funds

 

  • ‘Angel Funds’ to be included in the definition of “Venture Capital Funds” under the SEBI (Alternative Investment Funds) Regulations, 2012.

  • Individual angel investors need to have early stage investment experience, or be a serial entrepreneur or a senior management professional with 10 years experience. They will have to have tangible assets of at least Rs 2 cr. Corporate angel investors will have to have Rs 10 cr net worth or be a registered alternative investment fund.

  • Angel Funds will have a corpus of at least Rs 10 crore as against Rs 20 crore for other AIFs; and minimum investment by an investor shall be Rs 25 lakh (can be over a period of 3 years) as against Rs 1 cr for other AIFs. Further, the continuing interest by sponsor/manager in the Angel Fund shall be not less than 2.5% of the corpus or Rs. 50 lakh, whichever is lesser.

  • For ensuring investments are genuine angel investments, angel funds shall invest only in investee companies which:

  1. are incorporated in India and are not more than 3 years old; and

  2. have a turnover not exceeding Rs.25 crore; and

  3. are unlisted, and

  4. are not promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs 300 crore, and

  5. has no family connection with the investors proposing to invest in the company.

Further, investment in an investee company by an angel fund shall be not less than Rs.50 lakh and not more than Rs.5 crore and shall be required to be held for a period of at least 3 years.

Full Sebi release here.

 

I am not really sure of clauses like this for example :

Individual angel investors need to have early stage investment experience, or be a serial entrepreneur or a senior management professional with 10 years experience. They will have to have tangible assets of at least Rs 2 cr.

How does one define a “Senior Management Professional”?

And this.

angel funding shall be not less than Rs.50 lakh and not more than Rs.5 crore and shall be required to be held for a period of at least 3 years.

Does this mean an angel can’t invest less than Rs. 50 Lakhs?

Thanks,

Brijesh

Founder of TunePatrol.com

 

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12 Comments

  1. Hi Brijesh

    Senior management professional is not defined anywhere. But as a compliance SEBI will look the experience of the personnel. They may consider CXO, President levels and person been in board of companies for that period.

    Also he needs to have Assets worth rs 2 crores.

    On second point ANGEL cant invest less than 50lacs. So minimum investment in a round participation for an ANGEL is Rs 50 lacs

  2. So you are asking this as an Angel Investor or you need Angel Investments ? 
    Birth of the Indian Angel Investor!!! June 25, 2013

    ‘Angel Funds’ shall be included in the definition of “Venture Capital Funds” under the SEBI (Alternative Investment Funds) Regulations, 2012.
    Enabling Startups – Enabling Listing of Start-Ups and SMEs on Institutional Trading Platform (ITP) without having to make an IPO. Listing on ITP by Start-Ups and SMEs is expected to offer their existing investors better chances to find alternate buyers than if they search using their own network in the investment community.

    TunePatrol sounded nice 🙂 (Still on!!) 

  3. I think the 2 cr assets requirement is the only clear clause for an individual angel. And also, individual angels can invest any amount, only angel funds have to invest a minimum of 50 lacs.

  4. Haha I was just fact checking, I am no angel investor, I am 22 yr old startup founder 🙂 And thank you, you should go check out https://tunepatrol.com, I have a feeling you might like it. 🙂

  5. The post is still not clear, it pretty much repeats the same info that was there in the NBW article.

  6. The way you Pulled out the SEBI meeting link and the Points I thought otherwise, Thanks for clearing that up. Leave it to the ones who have been doing it from sometime (they are now Pro in the Angel Investments), rather concentrate on how if you needed an Angel to invest in your Startup you have a good collection 🙂
    I Had it here 🙂

    I think you misunderstood when I said it Sounded Nice – and (Still on) was not a Question, I was Listening to it then, when I posted and it is “STILL ON” on my system 😀

    I checked it Nice site design UI and UX too.

    You still however need to add something in the Terms page ? it looked empty to me…

    Welcome to the Party!! Cheers!!

  7. Haha ok, glad you liked it!

    Have noted the bug. 🙂

  8. Dear Brijesh, 

    SEBI has came out with these guidelines for funds that are registered with SEBI as venture capital funds and ask for specific rebates like exemption from lock in of one year for pre issue share capital at the time of IPO. 

    These guidelines do not mean that your father or friend or an associate cannot invest 10 lakh in a company promoted by you which is 5 years old and has revenue of INR 30 cr. It just means that this money cannot be invested from a fund registered with SEBI as a venture capital fund. Someone can very well do this investment in his personal capacity.

    Also these guidelines have been put in place to prevent the misuse of Venture Capital Fund Framework in market manipulation.

    Hope this clarifies the confusion. 

  9. But would my friend need to have assets of 2 cr?

    Individual angel investors need to have early stage investment experience, or be a serial entrepreneur or a senior management professional with 10 years experience. They will have to have tangible assets of at least Rs 2 cr.

  10. Do Share your FRIEND’s Contact details here or ask Him to post. 🙂

    I am Sure even if he has a FEW Lakhs to Invest as an ANGEL, and may not have the required 2 Cr in Assets,  he would Definitely find a Lot of Takers for their respective Startups to take onboard 🙂

    To start off with you can Ask him to be Your ANGEL, as a First Example and that would be in a Personal Capacity without any of the SEBI regulations since he may not be Listed there yet for a Start!!! Plus he would get the EARLY Stage investment experience too, if he is not a Serial Entrepreneur himself, or any Senior management Professional with 10 Years Experience.

    There is a First for Everything, Start TODAY!!

    The More the Merrier!!!

  11. The point is not the conditions but the intentions. SEBI has given these guidelines for sebi registered venture capital funds and others do not fall in this preview. 

    Your friend or any other person/enterprise who does not fulfill any of these conditions can also secure/provide VC/ angel funding, only thing is that the funder would not get some relaxations given by SEBI to VC/angel investors.

  12. You can check, if this is of any Help to you for your information update and your Angel Friend too 🙂

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