Why can't individuals be private equities

    22nd Feb 2018
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    As per latest reports, India is likely to become a 10 trillion dollar economy in less than a decade ranking as the world’s second-largest economy. Backed by strong democracy and partnerships, India has already emerged as the fastest growing major economy in the world. 

    Initiatives like ‘Make in India’, ‘Start-up India’, will boost the Indian economy by far. Start-ups are the epicenter of India’s innovation, bringing new ideas, jobs and competitive dynamics into the business environment. Hence, a robust regulatory and investment environment is required to enable a conducive setting for the growth and nurture of start-up sector in India.  

    One significant aspect which can boost the economy and start-up environment by far is the investment by individuals in private equities. While individuals are encouraged to invest as venture capitalists in start-up companies, the same is not the case with private equity investments.

     While the late stage start-ups are generally well funded as they are relatively matured players in the start-up market, the real challenges are usually faced by the early stage start-ups. The early stage start-ups find it difficult to raise funds at the stage when they need maximum economic support. This also leads to volatility in the current Indian start-up scenario.

     The year 2017 has witnessed more than 1900 million raised by private equity and venture funds in India. As per reports, nearly 15 billion dollars worth of funds is lying dry powder to be utilized and waiting to be invested in the Indian ventures. Such figures are big eye openers leading to the question, “Why can’t individuals invest in private equities in such a competitive start-up set-up, coupled with investment return environment?”

     Private equity can be an intriguing option for investors who are seeking potentially higher returns and are uncorrelated to the equity markets. An individual investing in private equity investment can also gain access to high profile opportunities, along with needed portfolio diversification. Moreover, the domestic private equity industry being regulated by SEBI will set compulsory registration and set investment holding limit.

     Governed by industry norms, individuals investing as private equity investors will eventually boost the start-up eco-system both for early as well as late-stage start-ups. By making private equity investment an open source and letting it unleash its own potential will help Start-up India grow by leaps and bounds. The early stage start-ups will also be nurtured with more investments. 

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