Know all about Angel Investors and Angel Funds

A startup company as the name says is a company in the initial stages of business. The start-up companies might have shown promise for profits, but still need capital to develop products or grow. Funding sources for these companies include family and friends, venture capitalists, crowdfunding, and loans. In such cases, angel investors come into the picture with sizeable investments in the business to help them succeed through mentoring or by offering direct management help.

Angel investors are High-worth Individuals (HNI) with a minimum net worth of ₹2 crore (excluding primary residence) or high-net-worth companies who invest in business ventures for ownership equity in the start-up company. Beyond financial commitment, angel investors are expected to display empathy and encouragement during the start-up’s early stages of growth. Experienced angel investors also offer valuable actionable insights after understanding their challenges. They being well-connected people in Society use their connections and network to promote the business through their social media platforms and increase the visibility of their portfolio start-up. Most importantly, Angel investors are supportive and stick with their startups during challenging times. Angel investors will have a Return on Investment (ROI) expectation in mind as part of their exit strategy. This is the point in time when they sell their equity in the company to make up their initial investment and any profits.

If the investors are individuals, they shall be required to have early-stage investment experience/ experience as a serial entrepreneur/ be a senior management professional with at least 10 years of experience. Early-stage investment experience’ shall mean prior experience in investing in start-up or emerging or early-stage ventures and ‘serial entrepreneur’ shall mean a person who has promoted or co-promoted more than one start-up venture.

If investors are corporate, they shall either have a net worth of at least Rs. 10 crore or an AIF registered under the regulations or a VCF registered under the SEBI (Venture Capital Funds) Regulations, 1996.

Angel Funds:

In India, “Angel fund” is a sub-category of Venture Capital Fund under Alternative Investment Fund (AIF) regulations 2013 that raises funds from angel investors. It is created by high-net-worth individuals or companies (generally called angel investors), for investing in business start-ups. An angel fund can accept investments from a maximum of 200 investors with a minimum investment of Rs.25 lakhs and a maximum of Rs.5 Crores from an angel investor. Regulation 19D(3) of AIF Regulations states that “angel funds shall accept, up to a maximum period of three years, an investment of not less than twenty-five lakh rupees from an angel investor” to invest in available investment opportunities within three years. However, the investors cannot exit from the funds before completing one year.

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