Angel investors are globally understood to be high net worth individuals who invest their personal income in business start ups or small and medium scale companies. Unlike venture capitalists, they use their own personal savings for investing in startup firms while not being insistent on membership in the board of directors of the investee company.
In India, the term angel investor is defined in Chapter III –A of SEBI (Alternative Investment Funds) (Amendment) Regulations, 2013, issued on 16 September 2013.
Here, Angel investor means any person, whether an individual or a company, who proposes to invest in an Angel funds and satisfies one of the following conditions, namely
- An individual investor who has net tangible assets of at least two crore rupees excluding value of his principal residence, and who:
- has early stage investment experience (prior experience in investing in start-up or emerging or early-stage ventures), or
- has experience as a serial entrepreneur (a person who has promoted or co promoted more than one start-up venture), or
- is a senior management professional with at least ten years of experience;
- a body corporate with a net worth of at least ten crore rupees; or
- an Alternative Investment Fund registered under the SEBI Alternative Investment Fund Regulations 2012 or a Venture Capital Fund registered under the SEBI (Venture Capital Funds) Regulations, 1996.
Angel investors encourage entrepreneurship in the country by financing small startups at a stage where such start ups find it difficult to obtain funds from traditional sources of finance such as banks, financial institutions, etc. Further, such investors provide mentoring to the entrepreneurs as well as access to their own business networks. Thus, angel investors bring both experience and capital to new ventures.