Angel funds: what changed in 2025 and what it means for startups

An angel fund is a Category I alternative investment fund (AIF) for angel investors. It pools money from many people, and the fund, not each person, invests in startups. SEBI registers these funds under the SEBI (Alternative Investment Funds) Regulations, 2012.

The structure gives startups one cap table entry instead of dozens of small ones, and it gives angels a way to share the work of finding and checking deals. It is the formal cousin of a syndicate, which is covered in a separate guide.

SEBI amended the AIF Regulations on 8 September 2025 and issued a circular on 10 September 2025. Law-firm summaries from Khaitan & Co and others describe the same core package, as of November 2026.

The main changes: angel funds must raise money from accredited investors, the cheque range per startup widened, angel funds now invest directly instead of launching a scheme for each deal, follow-on investing got rules, the lock-in can be shorter in some exits, and related parties cannot contribute to a deal.

Angel funds registered after the circular must raise money from accredited investors. These are individuals and entities that meet income or net worth tests and have been accredited through an approved agency. The guide on accredited investors in India explains the tests.

Funds registered before the circular have until 8 September 2026 to fully comply. During the transition they could offer investments to no more than 200 non-accredited investors, and those investors may keep their existing holdings under the fund's private placement memorandum. Some summaries say the older fund-level minimum from an angel investor was dropped under the new framework, so check the latest text.

A floor of ₹10 lakh lets an angel fund take a small first cheque in a pre-seed round, which used to be below the ₹25 lakh minimum. That can match the size of a typical pre-seed round better, and it lets the fund build exposure to more companies.

The ₹25 crore ceiling means the fund can keep backing a winner. Earlier, the ₹10 crore cap forced funds to stop long before a company reached Series B. The removal of the 25% concentration limit means a fund can put a larger share of its capital in a single company, which raises risk for its investors, and is one reason SEBI also tightened who can invest.

The earlier rule said an angel fund's investment in a startup could not be less than ₹25 lakh or more than ₹10 crore. The new range is ₹10 lakh to ₹25 crore, per the Khaitan note. A lower floor lets the fund write smaller first cheques, and a higher ceiling lets it back a company for longer.

The earlier cap of 25% of a fund's invested capital in one company was removed. Each investment must now carry contributions from at least two accredited investors, and a fund needs at least five accredited investors before it declares its first close.

Follow-on investing was a pain point. Under the new framework, an angel fund can follow on in a company even after it stops being a startup under the official definition, subject to two limits: the fund's post-issue stake cannot exceed its pre-issue stake, and total investment in the company cannot exceed ₹25 crore. Follow-on money can come only from investors who joined the original investment, in proportion to their earlier contribution, with room to reallocate if some drop out.

The usual one-year lock-in on an angel fund's investment can be cut to six months if the exit is a sale to a third party. Sales back to the company or to its promoters do not qualify for the shorter period.

The fund manager or sponsor must now keep a continuing interest in each investment of at least 0.5% of the amount invested or ₹50,000, whichever is higher, and it cannot come from waiving fees. Earlier, the test was tied to the fund's corpus.

Related-party contributions are banned: a fund cannot take money for an investment from an angel investor who is a related party to the startup. Angel funds can also invest overseas, within RBI and SEBI limits.

An angel can still invest directly in a startup without a fund, and the cap table then shows the person by name. A syndicate is a group that invests together through a platform, usually through a special purpose vehicle. An angel fund is a registered AIF, so it is under SEBI's rules, files reports and is open to inspection.

The accredited-investor condition makes the fund route narrower than direct investing. A person who does not meet the tests can still back a startup directly, but cannot join a new angel fund. Founders choose between a single large cheque from a fund and several smaller ones from individuals, depending on the terms and the help they want beyond money.

Founders will see fewer small cheques from unaccredited individuals through angel funds, and more structured funds with larger cheques. The ₹25 crore ceiling means an angel fund can stay in a company longer. A startup should ask any angel fund whether it is registered, whether its investors are accredited, and whether the follow-on terms are in the term sheet.

Syndicates and platforms that pool angel money outside a registered fund face the same shift, which the syndicates guide covers. This guide is general information, not legal or investment advice, so check with a professional for specifics.

These figures come from law-firm summaries, as of November 2026.

• Cheque per startup: ₹10 lakh to ₹25 crore, earlier ₹25 lakh to ₹10 crore.
• Accredited investors per deal: at least 2. Before first close: at least 5.
• Existing funds must comply by 8 September 2026.
• Lock-in: 1 year, or 6 months if exit is to a third party.
• Manager interest: at least 0.5% of the amount invested or ₹50,000, whichever is higher.