Who can invest in India?

Our investments in India are through a syndicate model in an AIF Category I (Angel Fund) and eligibility for it is:

Indian residents who qualify as an Eligible Angel Investor.
Trusts are not eligible to invest
Non Indians from neighbouring countries require a NRO account

How do Indians qualify as an Eligible Angel Investor?

You need to meet one of the following requirements:

an individual investor who has net tangible assets of at least INR 2 crore excluding value of his / her principal residence, and who has early stage investment experience, or
has experience as a serial entrepreneur, or
is a senior management professional with at least 10 years of experience.
a partnership firm with each partner having net tangible assets of at least INR 2 crore excluding value of his / her principal residence
a body corporate / HUF with a net worth of at least INR 10 crore
an AIF (Alternative Investment Fund) registered under SEBI AIF Regulations, 2012 or a Venture Capital Fund (VCF) registered under the SEBI (Venture Capital Funds) Regulations, 1996

What are the tax implications of investing through AngelList India’s AIF-regulated “Angel Fund”?

At the time of making an investment, the angel investor becomes part of an Angel Fund, which is registered with SEBI under the AIF Regulations. Under the (Indian) Income-tax Act, 1961. Angel Funds have been accorded pass through status in respect of all incomes (except business income), i.e. investors are subject to tax as if they had directly invested in the portfolio companies. There is a 10% withholding at the time of making payments to investors, which the investors can claim credit for while filing their returns.

What are the Indian tax implications for non-Indian investors?

For non-Indian investors, at the time of exit, the purchaser may withhold taxes on the amount of gains and the SPV will file taxes on its returns of income in India.
Tailwind Financial Services Pvt Ltd is not qualified to provide tax advice and the above should not read as tax advice. There are many exceptions to the generalisation stated above, so please be sure to consult with your tax advisor and accountant before making an investment.

Will Indian investors be able to invest into US syndicates?

Yes, but the bar for accreditation for US syndicates is slightly higher. Individuals are required to have a net worth of at least $1,000,000, excluding the value of one’s primary residence, or have an income of at least $200,000 each year for the last two years.

How are Syndicates different to investing directly into the company?

Tailwind gets carry for our syndicated investments. This allows us to leverage their deal flow by earning upto 20% carry on the allocation being shared with our backing investors.

Investors can participate in syndicates with lower minimums. They get access to lead’s deals and benefit from their experience in picking and managing investments. These deals will be typically hard to access for someone who hasn’t spent considerable time in building deal flow.

Startups get more capital with a single cap-table entry.

What are the limits to keep in mind while investing in syndicate through India based Angel Funds?

Investors will be required to meet the minimum threshold of investing INR 25 Lakhs over a period of 5 years from the time of making their first investment with the respective Angel Fund. This can be in a single investment or over multiple investments.

Generally, it is recommended to make multiple investments to have a portfolio of startups that will help in diversifying risk associated with startup investing.

How often can investors expect an update on investments?

Companies may or may not choose to provide any information about performance on regular basis.

Investors will be getting a statement of report on their unit holdings annually. This will be provided by a third party.

Is there any added benefit of raising through Angel Fund in India?

Raising through an Angel Fund benefits the company since the company is exempt from the Indian “Angel Tax” which could otherwise apply in certain situations if the Angel Investor had invested directly into the company.

The Indian “Angel Tax” is levied on the portfolio company on the capital invested, if it receives funding at a valuation, which is more than the fair market valuation derived as per the Indian Income tax rules and will be forcefully treated as income.