Angel Network FAAD Gets SEBI Approval For INR 300 Cr AIF, To Invest In Early-Stage Startups

Early-stage investor network FAAD on Monday (December 12) said it has received approval from the Securities and Exchange Board of India (SEBI) to launch a Category 1 Alternative Investment Fund (AIF) of INR 300 Cr.

The sector-agnostic investor network said it is planning to build a war chest in the coming months to invest in pre-seed to Series A early-stage startups across sectors. The fund will have a special focus on sectors like agritech, deeptech, healthtech, and cleantech.  

The ongoing funding winter has hit the Indian startup ecosystem this year. Due to global uncertainties and weak market sentiment for tech companies, the volume of large deals worth $100 Mn and above declined 50% year-on-year (YoY) to 45 this year till November from 90 deals last year, as per an Inc42 analysis. However, early-stage funding, particularly in the seed stage, has grown in certain aspects. Seed-stage funding increased 21% YoY to INR 40.2 Cr in Q3.

Emphasising investors’ trust in early-stage startups, Karan Verma, cofounder and director of FAAD, said that despite the talks around funding winter, the enthusiasm for capital support to early-stage startups is growing. 

“There is a new wave of angels, HNIs and VCs who believe deeply in the value addition that technology-led innovation can bring to society and are always on the lookout to back entrepreneurs who can lead the disruption,” said Verma. “We are gearing to launch the AIF and see it as a strong force that will fuel young startups with the combined energies, support and capital from our growing network of investors.”

Cofounded by Verma and Dr Dinesh Singh, FAAD was founded in 2015. Angel Network by FAAD was launched in 2019. It claims to have so far invested over INR 75 Cr in more than 60 startups across technology sectors, with a cheque size of $50K to $1 Mn. Some of its portfolio companies include Blu Smart, Battery Smart, WCube, Cleardekho, Huviair, Hesa, and Beyond Snacks.

FAAD has a network of investors based in India, Singapore, Dubai, Canada, the US, and the UK. 

Speaking about FAAD’s focus on early-stage startups, Dr Singh said, “The reason why early-stage ideas continue to receive capital and network support is that over time the quality of innovation and the business acumen of new entrepreneurs have evolved which instils a lot of confidence among angels, HNIs and VCs to not shy away from early bets.”

Despite the funding winter, several angel networks and VC funds have launched new funds this year to invest in startups. After receiving SEBI approval earlier this year, early-stage investment firm Yatra Angel Network (YAN) recently announced the first close of its maiden fund worth INR 90 Cr last month. The firm said that it was looking to invest in a few fintech startups across pre-seed, seed, and pre-series A rounds.

VC firm SphitiCap also announced the launch of its maiden venture fund with a corpus of $500 Mn for early-stage startups in October.

However, SEBI has been introducing several regulatory changes to the AIFs. After recently tightening its framework for AIFs in several aspects, the markets regulator issued fresh guidelines last week barring AIFs from raising fresh capital from foreign investors who do not meet certain specific conditions.