Angel investors note: Getting accredited for funding startups – SEBI working on this mechanism

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Updated: December 27, 2018 1:33:03 PM

“Angel funding is critical for startups & for driving entrepreneurship in Tier 2/3 cities.”

“Angel funding is critical for startups & for driving entrepreneurship in Tier 2/3 cities.”

The Department of Industrial Policy & Promotion has clarified that markets regulator SEBI is working on a mechanism for investors to get accredited for investing in startups, days after NITI Aayog CEO Amitabh Kant’s tweet caught some angel investors unaware about any such existing facility.

“SEBI is working on the Accredited Investors Mechanism and once SEBI puts out the notification the accredited investor scheme/ regulation will come into effect,” a DIPP spokesperson told FE Online in response to a query about Amitabh Kant’s tweet.

Last week, NITI Aayog CEO Amitabh Kant had urged angel investors in a tweet to register themselves as accredited investors for their KYC filing and invest in startups. Amitabh Kant’s tweet was amid the recent issue of tax notices sent to startups and angel investors. “All Indian angel investors can be registered as accredited investors for their complete KYC compliance. This can help in domestic investments rising from the current 10% of all startups investments to over 50% over the next two years. This will trigger a new wave of startups,” Kant tweeted.

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However, several angel investors FE Online spoke to denied being aware of any such platform or mechanism. “There is no government website to register and get KYC done as an individual investor,” said AngelList India’s partner Utsav Somani. “Currently there is no such platform that exists or for individual investors,” said Chandni Jafri, CEO, Mumbai Angels.

Amitabh Kant, in another tweet last week, highlighted the need for an increase in angel investments particularly in tier 2 and 3 cities to boost entrepreneurship. “Angel funding is critical for startups & for driving entrepreneurship in Tier 2/3 cities.”

However, angel investors have remained wary of whether this would help boost angel investments. “Right now the issue is of tax harassment. Even after the accreditation, unless these problems go away it will not help in increasing the investments,” said Siddharth Ladsariya, another prominent angel investor and director at Everest Flavours. Ladsariya has so far invested in around 100 startups such as OYO, Ola, Myntra, etc.

As per a Nasscom report in October this year, seed stage funding went down by 21% to $151 million in 2018 from $191 million in 2017 majorly due to the alleged angel tax provision.

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