The Securities and Exchange Board of India (Sebi) has taken a notable step toward further boosting India’s startup ecosystem. It has proposed for some substantial changes to its angel investment framework to align with global practices. The call is for a more flexible and accessible investment space to support them.
The impactful proposal is raising maximum investment cap by an angel fund from Rs 10 crore to Rs 25 crore. Lowering the minimum investment threshold from Rs 25 lakh to Rs 10 lakh opens doors further for investors who are willing to make smaller bets while supporting a diverse pool of startups.
The initiative of SEBI to restrict participation to accredited investors appears to be a double-edged sword. It ensures that angel investors have the experience and financial resilience to handle the high-risk as well as high-reward nature of startup funding.
The proposal to remove the 25% cap on single-company investments is being looked as a progressive shift. The shift benefits such startups which demonstrate exceptional potential and also enables funds to pursue more strategic.
The decision of SEBI to broaden definition of angel investors could be another positive influence. SEBI is strengthening a more inclusive investment climate by allowing family trusts, HUFs and sole proprietorships to participate and lower the net worth requirements for corporate entities. This shift is said to encourage a wider pool of investors and particularly to those which have significant family wealth and generational assets.
The proposals warrant a careful approach and startup investments are fraught with risks that require sophisticated understanding. The framework of SEBI must strike a balance if India is to become a leading startup hub.
