Angel funds under the SEBI AIF Regulations: a practical guide for managers and investors

An angel fund is a sub-category of Category I AIF built for early-stage investing, where investors choose each deal. The Regulations give it a chapter of its own (Regs 19A to 19H), and several of the general AIF rules do not apply to it.

Who can invest

An angel fund raises money only from accredited investors (Reg 19D(1)). There is no minimum investment for an angel investor (Reg 19D(2)). Before declaring its first close, the fund must on-board at least five accredited investors (Reg 19D(6)); if it fails to declare the first close, it must refile its placement memorandum with the fee (Reg 19D(7)).

What changed in July 2026

An angel fund's placement memorandum is now filed with SEBI along with the registration application, without going through a merchant banker, and the separate SEBI-comments step for angel funds was removed (Reg 19D(4), (5), as amended).

How the fund invests

• Only in start-ups that are not part of a group with turnover above ₹300 crore (Reg 19F(1)).
• At least ₹10 lakh and at most ₹25 crore in each investee company (Reg 19F(2)).
• Never in its associates (Reg 19F(4)).
• Each investment needs contributions from at least two accredited investors (Reg 19F(5)).

Deal by deal: the investor decides

The manager must offer every investment opportunity to all the angel investors (Reg 19G(3)) and may take an investor's money for a deal only after that investor approves it (Reg 19G(2)).

The manager's skin in the game

The manager or sponsor must have a continuing interest in each investment of at least 0.5% of the amount invested or ₹50,000, whichever is higher, and not through a waiver of management fees (Reg 19G(1)).

Example. On a ₹2 crore investment, 0.5% is ₹1 lakh, which is higher than ₹50,000, so the continuing interest is ₹1 lakh. On a ₹40 lakh investment, 0.5% is ₹20,000, so the ₹50,000 floor applies.

Things an angel fund cannot do

• Launch schemes (Reg 19E).
• List its units on a stock exchange (Reg 19H). Investors' money stays in until the fund returns it.

Key takeaways

• Check accreditation before accepting anyone, and line up five accredited investors for first close.
• Keep a written approval from each investor for each deal.
• The SEBI AIF angel fund calculator checks the ₹10 lakh to ₹25 crore range and works out the continuing interest.