Times of India: March 2, 2013
BANGALORE: Angel investors have remained unsung heroes in the Indian funding eco-system so far. However, the Budget has now proposed to give them a better standing – on par with venture capital (VC) investors. This is expected to create buoyancy in the seed funding market, and boost entrepreneurship.
Sunil K Goyal, CEO & fund manager at YourNest Angel Fund, said, “Budding entrepreneurs are fortunate that the government has now advised market regulator Sebi to define the role of angel investors and treat them as equal to early stage venture capital funds.” The Budget has proposed that like VCs, a group of angels will get the pass-through benefit. That means, if an angel invests in a fund and the fund in turn invests in a startup, any capital gains realized from this investment will be taxed only in the hands of the angel investor and not at the fund level. This will eliminate the existing multiple layers of taxation.
Alok Mittal, MD, Canaan Partners, said the measure would encourage many more angels to become active in the space. Sachin Maheshwari, principal at Zephyr Peacock India, said being part of a group gives people more confidence to invest. “It makes their investment less risky as they have the choice of investing little monies in more ventures,” he said.
However, Ravi Kiran, co-founder of VentureNursery, an angel-backed accelerator, noted that most angel investors invested in their individual capacity and not as part of a pool. “By saying that angel investor pools will get the pass-through benefit, the finance minister is in essence saying that individual angel investors should be part of a fund and register with Sebi if they want the pass-through benefit. This is akin to telling retail investors in the stock market that they should only invest through mutual funds, not directly. The FM’s move may raise the buoyancy in the market, but it is no recognition for individual angels who play in risky markets,” he said.