Seed and early-stage investment platform LetsVenture on Thursday announced that it has registered itself as an angel Alternate Investment Fund (AIF) under the Securities and Exchange Board of India's (SEBI) regulation. Simply put, this would mean that LetsVenture can invest in startups by creating a pool of investments drawn from private players--both from within India and outside.
Starting this month, LetsVenture began moving its investor commitments through the angel AIF.
In a press statement, the company said that as an investor on the platform, and a member of the AIF, investors can continue to log in and engage with the startups. Once they decide to commit, they will need to go through the process of signing up through the AIF before the closure of the round.
LetsVenture aims to enable early-stage investments worth Rs 1,000 crore in the next two years through this new vehicle.
The SEBI angel AIF is a category 1 AIF, which essentially allows angel investors to express an intent to commit a minimum of Rs 25 lakh over five years. This means that an angel investor can allocate over Rs 5 lakh to the startup every year for the next five years.
“There is no pre-scheduled drawdown – they will be required to keep the allocation over the next five years and can distribute as they decide to commit. They can always decide which startup they want to invest in and engage with other investors during the process of the fundraise. Once the commits are made, the investment goes through a scheme in the AIF and they will hold units in the scheme. When we say “a scheme within the Angel AIF”, think regulated SPV. This is a better model than the current LLP model which some investors use when they work with friends to pool investment into a startup.”
Given that there is only one entity on the cap table, investors can now invest smaller amount and diversify their portfolio. This will enable startups to become an asset class accessible to more and more investors with smaller corpus size.
“Lead investors are also going to get the benefit of angel AIF. Under the new regulation, it will be easier to incentivise the lead investors by providing them with a carry option. This will make them entitled to a percentage of profit the other investors make at the time of their exit,” said the statement.
With AIF, there is consolidated reporting and ease of portfolio management. This also allows access to better negotiating power in future rounds and access to better deals.
“This new vehicle will empower the investors to diversify their portfolio better as well as take away a lot of burden from the founders as now the fund will do the reporting and coordination with investors,” said the press release.