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SEBI's New Angel Fund Rules (2025): Only Accredited Investors, ₹10 Lakh to ₹25 Cr Cheques, and What It Changes for Your Angel Round
Angel funds now accept only accredited investors, and the per-startup limits changed. Most founders have not noticed. What the SEBI rules mean for your angel round, your cap table and your timeline.
Published 28 September 20264 min read
The short answer
SEBI's revised angel fund framework, effective 8 September 2025, allows angel funds to raise only from accredited investors, requires at least five accredited investors before first close, and lets a fund invest ₹10 lakh to ₹25 Cr in a single startup, including follow-ons. Existing funds had until 8 September 2026 to transition. For founders, this means angel pools are larger and more professional, and pre-accredited individual angels matter more.
Who this is for: Founders raising angel or seed rounds of ₹50 lakh to ₹5 Cr, especially through angel networks and platforms.
Summary: what most founders miss
- Only accredited investors can now put money into a SEBI angel fund. India had only a few hundred accredited investors registered as of mid-2025, so this is a meaningful narrowing.
- Per-startup limits changed: minimum ₹10 lakh (down from ₹25 lakh), maximum ₹25 Cr including follow-ons (up from ₹10 Cr).
- Each investment needs at least two investors from the fund participating; the old 200-investor cap per scheme is gone.
- Follow-ons are allowed only if the fund's post-issue shareholding does not exceed its pre-issue shareholding.
- An angel fund is one line on your cap table instead of 20 individuals. That is the main reason to prefer it.
If you are raising an angel round in India through a network or platform, there is a good chance your money will come through a SEBI-registered angel fund rather than from individuals directly. SEBI rewrote the rules for these funds in September 2025, and the one-year transition ended in September 2026. Almost nothing written for founders explains what changed.
What is an angel fund, and why do founders care?
What changed in September 2025?
| Rule | Before | From 8 September 2025 |
|---|---|---|
| Who can invest in the fund | Angel investors meeting older net worth tests, including non-accredited | Accredited investors only |
| Minimum investors before first close | No accredited-investor minimum | At least 5 accredited investors |
| Maximum investors per scheme | 200 | No cap |
| Minimum investment in a startup | ₹25 lakh | ₹10 lakh |
| Maximum investment in a startup | ₹10 Cr | ₹25 Cr, including follow-ons |
| Investors per deal | No minimum participation rule | At least 2 fund investors must participate in each investment |
| Follow-on investment | Restricted | Allowed if the fund's post-issue shareholding does not exceed its pre-issue shareholding |
| Lock-in on the fund's holding | 1 year | 6 months for sale to third parties; 1 year for buybacks or sales to promoters or their associates |
| Related parties | Limited restrictions | Fund cannot invest in startups where investors or the manager are related parties |
| Transition | Not applicable | Existing funds had until 8 September 2026 to comply |
Summary of SEBI's revised framework as reported by Vinod Kothari Consultants and other legal commentary. Check the current SEBI circular for exact wording.
Who is an accredited investor in India?
| Route | Annual income | Net worth |
|---|---|---|
| Income-led | ₹2 Cr or more | Or net worth ₹7.5 Cr, at least half in financial assets |
| Combined | ₹1 Cr or more | And net worth ₹5 Cr, at least half in financial assets |
| Body corporates and other trusts | Net worth ₹50 Cr or more |
Accreditation is issued by accreditation agencies linked to KYC registration agencies, based on the applicant's KYC and financial information. Validity is two or three years depending on the years of compliance shown.
What it means for your round
- Bigger, fewer tickets through funds. With a ₹10 lakh floor and a ₹25 Cr ceiling per startup, one angel fund scheme can now take a meaningful share of a seed round, and follow on later.
- Cleaner cap tables. A fund with 30 contributors is still one shareholder. Series A leads prefer this.
- More formal diligence. Accredited investors and professional managers ask for data rooms and clean compliance. See Why Good Brands Fail Due Diligence.
- Follow-on limits. The fund cannot increase its percentage in a later round through follow-ons. Plan pro rata rights accordingly.
- Lock-in on exits. If you plan a secondary buyback for early angels, a one-year lock-in applies to buybacks and promoter purchases.
Direct angels vs angel funds: which is better for you?
| Factor | Individual angels directly | SEBI angel fund |
|---|---|---|
| Cap table | One line per angel | One line for the fund |
| Paperwork per investor | KYC, PAS-4, allotment per person | Handled by the fund manager |
| Counts toward the 200-person limit | Each person | The fund counts as one |
| Investor eligibility | Anyone you identify (subject to company law) | Only accredited investors in the fund |
| Minimum cheque | Whatever you agree | ₹10 lakh per startup from the fund |
| Speed | Can be fast for a few angels | Depends on fund manager's process |
| Follow-on flexibility | Individuals decide | Cannot increase fund's percentage |
Case study
Two ways to raise the same ₹1.5 Cr
Consumer AI app, pre-revenue with paying pilot users, raising a ₹1.5 Cr angel round
Situation
The founders had 22 interested angels from their network, cheques from ₹3 lakh to ₹15 lakh.
What was missed
Taking all 22 directly would mean 22 PAS-4 letters, 22 KYC packs, 22 signatures on the SHA and 22 names on the cap table the Series A lead would inherit. Nine of the angels were not accredited, so a single angel fund could not take them all.
What changed
The founders took the 13 accredited angels through an existing angel fund scheme on a platform, as one ₹1.1 Cr investment, and took four larger non-accredited angels directly for ₹40 lakh. The other smaller cheques were declined politely, with an offer to join the next round.
Outcome
The cap table added five lines instead of 22. The round closed in five weeks.
The lesson
Decide the cap table you want at Series A, then design the angel round to get there.
Illustrative case. Figures are representative of patterns in Indian rounds, not a specific company.
Related: Can You Announce Your Fundraise on LinkedIn? and Family Office, VC or Strategic Investor. Planning an angel round with many small cheques? Share your plan with us.
Read next: NRI investment, repatriable vs non-repatriable.
Questions founders ask us
Who can invest in an angel fund in India after SEBI's 2025 changes?
Only accredited investors. Individuals qualify with annual income of ₹2 Cr or more, or net worth of ₹7.5 Cr with at least half in financial assets, or income of ₹1 Cr plus net worth of ₹5 Cr with half in financial assets. Corporates and most trusts need net worth of ₹50 Cr.
How much can an angel fund invest in one startup?
Between ₹10 lakh and ₹25 Cr, including follow-on investments, under the September 2025 framework.
Do angels investing directly in my company need to be accredited?
Not under company law. Accreditation is required to invest through a SEBI angel fund. Direct investment is governed by Section 42 private placement rules and, for foreign angels, FEMA.
Does an angel fund count as one investor for the 200-person limit?
The fund is one allottee in your private placement, which is one of the reasons founders prefer it for rounds with many small cheques.
How does someone become an accredited investor in India?
By applying to an accreditation agency set up by a KYC registration agency, with KYC and financial documents. Validity is two or three years depending on the years of financial information provided.
About the author
Written by the Alphamark Ventures team, a fundraising advisory firm helping founders raise seed, angel and pre-Series A rounds, with a focus on consumer, consumer tech and consumer AI. Figures are as of the date shown and are for general information; this is not legal, tax or investment advice.
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