Do I need a special ETF account?

No, you can begin without having a specific ETF account. You can purchase and sell ETFs using any brokerage account, just like when investing in stocks. You don't need a specific ETF account or additional order fees when using an online brokerage account to buy and sell ETFs at a reasonable price.

Do you need to have a minimum amount to buy ETFs?

There is no minimum purchase requirement for ETFs, in contrast to mutual funds. Since there is no minimum investment requirement for ETFs, you can purchase anything from one share to thousands of shares.

What happens to the dividends of the underlying stocks?

The dividends received by an exchange-traded fund are typically reinvested in the fund (if it is a Growth/Accumulation plan). If the ETF is a Payout/Dividend plan, the dividends are collected by the fund house and distributed periodically to the investors. The investors are usually not required to do anything on their end.

How long should you hold an ETF?

ETF investments can offer investors several advantages, including wide exposure to many industries and sectors and assistance in lowering overall portfolio risk. Long-term investors might keep an ETF that meets their needs for decades in a perfect world, especially if their objective is to fund retirement.

No. Earnings from equity ETFs held for more than 1 year (Long-Term Capital Gains - LTCG) that exceed ₹1.25 lakh in a financial year are subject to a 12.5% tax without indexation benefits. However, taxes on short-term equity ETFs (held for less than 1 year) are 20% (Short-Term Capital Gains - STCG). Debt ETFs have different taxation rules; their gains are treated as normal income and taxed according to your applicable income tax slab rate.

Who are angel investors?

Angel investors are high-net-worth investors who use their personal funds to invest in early-stage startups in exchange for equity. Along with investment, they are often technical advisors, mentors, and connectors who assist young businesses to grow and scale in sustainable ways.

Do startups have to repay angel investors?

Start-ups are not paying back angel investors like a loan. Angel funding means equity-based funding, where investors are only paid off through exits such as acquisition, buyback, or IPO. If the startup fails, the invested capital may not be recovered.

How much equity do angel investors take?

Angel investors typically take between 10% to 25% equity, depending on the valuation of the startup, how fast it would grow, and also what phase of funding it is. Experienced angels do not dilute too much so that founders do not give up the motivation and majority control of the business.

What sectors do angel investors prefer?

Angel investors are often interested in hot sectors, which include technology, fintech, healthtech, SaaS, consumer brands and clean energy. Most angels invest in industries which they understand well, providing them with the capacity to add value through expertise, mentoring and relevant professional networks.

Can NRIs be angel investors in India?

Yes, NRIs can be angel investors in India according to the FEMA and RBI Regulations. Investments have to be channelled through permitted channels and within sectoral caps and follow pricing and reporting guidelines which apply to foreign investments in Indian startups.

What is ETFs & How to Buy and Sell ETFs

An angel investor is a high-net-worth individual who uses their personal capital to invest in early-stage startups in exchange for equity. Angel investing helps startups scale before institutional funding arrives.

Beyond funding, angel investors offer expertise in the industry, provide mentorship, and can help startups gain knowledge and expand operations with strategic networks to help them scale their operations and prepare them for later funding rounds or going public (such as an acquisition or IPO).

Key Takeaways

Typical individual angel investment ranges from ₹10 lakh to ₹2 crore, up to ₹5 crore, and varies by sector and founder negotiation (common equity range is 10–25%).

SEBI defines “angel investor” primarily in the context of angel funds under AIF rules, with accreditation criteria for funds.

Angel funding usually occurs at the seed or pre-seed stage, before venture capital participation.

Angel exits commonly occur through acquisitions, secondary sales, or IPOs.

What Is an Angel Investor?

Unlike venture capitalists who manage pooled money from various investors, angel investors typically utilise their personal wealth to back startup businesses in exchange for company equity. They are affluent individuals who commit their resources and expertise over potentially long periods, often planning an exit strategy through a company sale or IPO to realise a profit. Angel investors are versatile, frequently investing across multiple industries.

Exploring the Background of Angel Investors

Angel investors typically have deep roots in the business sector, yet they come from various professional backgrounds. Commonly, angel investors include:

Professionals from various fields include law, medicine, accounting, and financial advisory services.

Executives at the C-level who have climbed the corporate ladder and thoroughly understand what it takes to steer a company to success.

Entrepreneurs and small business owners who have previously established and grown successful ventures possess a keen eye for identifying promising new startups.

Individuals who dedicate part of their careers to funding small businesses as an investment hobby.

The Roots of Angel Investing

The concept of "angel" investing can be traced back to the Broadway theatre scene, where affluent individuals often financed productions. The term "Angel Investor" was popularised by William Wetzel, a University of New Hampshire professor and founder of the Centre for Venture Research. Wetzel studied the methods through which entrepreneurs secured funding, leading to the establishment of the term and concept of angel investing.

At the early stages of a startup, angel investors often serve as a crucial intermediary between personal funding and external capital sources. Typically, these investors fund ventures within familiar industries, enhancing their investment strategy and turning them into invaluable networking assets for growing businesses. As relationships develop, angels frequently introduce entrepreneurs to additional investors, supporting the business's expansion.

Understanding How Angel Investing Functions

Angel investors typically engage with startups during the early "seed" or "angel" funding phase. This involvement can occur at the startup's conceptual stage or once the business is operational.

Often, angel investors step in following the first funding round, which is generally sourced from the founders, their friends, and family, or through initial bank loans. The starting funds are usually modest, often around ₹5 lakh, just enough to get the product or service off the ground.

Angel investors usually enter the scene once this initial funding is in place, but before that, the startup needs a larger investment, like that from a venture capital firm. Their funding is crucial for scaling the business at a pivotal early stage, just as the initial funds are dwindling and before venture capitalists take an interest in the business.

The Investment Process Explained:

1. Connection: Angel investors find potential investments through various means such as word-of-mouth, industry seminars, professional referrals, online forums, or local business events.

2. Due Diligence: If interested, the angel will evaluate the startup by discussing with the founders, reviewing financial and business documents, and assessing the industry landscape.

3. Agreement: Following discussions, if both parties agree, they draft a term sheet outlining the terms of investment, equity shares, rights and protections for the investor, and the governance structure.

4. Legalisation: Once the term sheet is agreed upon, a formal contract is signed, making the deal official, and funds are transferred to the startup.

Investment amounts can go as high as ₹5 crore. In some cases, angel investors form syndicates, in which a group of angels collectively invests between ₹50 lakh and ₹3 crore or more in a single deal.

Individual angel investors often target equity stakes in the 10%–25% range so that founders retain majority ownership and motivation, although exact percentages vary by deal.

Example:

Consider a tech startup specialising in eco-friendly packaging. An angel investor, intrigued by the concept, meets the founders at a green technology conference. Impressed by their vision and initial traction, the angel offers ₹50 lakh in exchange for a 20% stake, drafts a contract stipulating growth milestones, and finalises the investment, fueling the startup's next development phase.

Advantages of Angel Investors

Here are the key benefits of obtaining angel investment:

Networking: Angel investors often have significant connections within the industry that can help entrepreneurs find new clients, partners, and additional funding sources.

Industry insight: Many angel investors are former or current business owners with a wealth of knowledge and experience in similar sectors, offering valuable advice and guidance.

Additional resources: Having an angel investor on board can enhance a company’s credibility, potentially attracting further investment.

Additional funding availability: If a business requires more funds, angel investors might provide further financial support, especially when traditional financing options are unavailable.

Disadvantages of Angel Investors

Here are the drawbacks of obtaining angel investment:

Reduced control: Some angel investors may require a significant stake in the business, potentially diluting the original owner’s control and complicating future fundraising efforts.

Demanding process: The investment process can be lengthy and requires extensive documentation, including financial statements and bank records.

Risk of rejection: Despite a business’s potential, there’s always a risk that an angel investor might not see the same value, leading to possible rejection.

Due diligence required: Without proper vetting, partnering with an angel investor might lead to challenges. It’s crucial to check their background and talk to other businesses they’ve invested in to ensure they’re committed and beneficial partners.

How To Find an Angel Investor?

Locating angel investors involves a few strategic steps. Begin by searching locally, as many angel investors prefer investing in businesses near their locations.

Then, explore industry-specific associations and online platforms to find suitable angel investors. Consider starting with notable networks such as:

Indian Angel Network (IAN): Established in 2006, this network provides funding and mentoring to startups across 16 different sectors.

Mumbai Angels Network: With over 750 investors spread across global cities, this network supports various sectors, including technology, life sciences, and electric vehicles (recently launched ₹1,000 crore angel fund).

Additionally, leveraging social media platforms like LinkedIn can be effective. Utilise the search function to identify angel investors in your vicinity, facilitating easier communication and potential partnerships.

Essential Tips for Startups Considering Angel Investment

If you're an entrepreneur looking to engage with an angel investor, it's crucial to prepare thoroughly. Here's how to set the stage:

Develop a solid business plan: Before seeking funding, create a detailed business plan. This should outline your financial forecasts, budget, marketing strategies, and target market insights. A robust plan impresses potential investors and guides your path to success.

Clarify what the investor brings to the table: Understand and specify what you expect from the investor beyond capital. Angel investors often provide mentorship and strategic advice, contributing significantly to your startup's growth. Clear expectations ensure a transparent and effective relationship.

Define roles clearly: Establish clear roles within the business to avoid future conflicts. Angel investors may have their own operational ideas, so clarifying each person’s role early on is vital.

Accreditation of Angel Investors According to SEBI

The Securities and Exchange Board of India (SEBI) has framed certain norms for the regulation of investing by angel investors and ensures that the investors are protected from high-risk exposure.

Under SEBI’s AIF Regulations (amended September 9, 2025), angel funds (now registered as Category I AIFs) must currently invest at least ₹10 lakhs and not more than ₹25 crore in a single startup.

Existing funds have until September 8, 2026, to transition to Accredited Investors only (net worth ≥₹5 crore excluding primary residence, or income ≥₹50 lakh/₹1 crore for 2/3 years, verified via SEBI-registered agency certificate). Funds must declare first close within 12 months of PPM with ≥5 accredited investors.

These limits apply to SEBI-registered angel funds, which pool capital from accredited investors to back early-stage ventures, not to informal individual angel investments.

Key updates as of 2026

Angel Funds are classified as a distinct Category I AIF under SEBI.

Angel Funds must raise capital only from Accredited Investors.

Existing Angel Funds have until September 8, 2026, to comply with the Accredited Investor regime.

New Angel Funds (post-September 2025) must onboard only accredited investors.

At least 5 Accredited Investors must be onboarded before the first close.

First close must occur within 12 months of SEBI taking the PPM on record, failing which the PPM must be refiled.

Angel Funds must invest directly in portfolio companies (no separate schemes required).

Follow-on investments are permitted in existing portfolio companies.

Total investment (initial + follow-on) in a single company is capped at ₹25 crore.

Standard lock-in for investments is 1 year, reduced to 6 months for third-party sale exits.

Overseas investments are permitted subject to RBI/SEBI rules, capped at 25% of investable funds (at cost).

Angel Funds must disclose a defined investment allocation methodology in the PPM.

Ad-hoc allocation discretion is not permitted.

Funds with investments exceeding ₹100 crore require annual compliance audits of PPM terms.

Angel Funds must report valuation and cash flow data to benchmarking agencies from FY 2025–26 onward.

Angel Investors vs Venture Capitalists

Here’s a simplified comparison between angel investors and venture capitalists, presented in a table format:

Parameters	Venture Capitalist	Angel Investors
Source of Funds	Invest capital pooled from others	Invest their own money
Stage of Investment	Typically, invest at a later stage when the business is profitable	Invest at early stages, often at ideation
Investment Amount	₹10+ crore typically	₹10 lakh to ₹2+ crore generally

Conclusion

Angel investors are indispensable to the startup ecosystem, providing not only crucial early-stage capital but also invaluable mentorship and industry connections. They differ from venture capitalists in their investment stages and sources of funds, focusing on smaller, more personalised investments.

For startups seeking growth and guidance, understanding and leveraging the support of angel investors can be a pivotal step towards achieving sustainable success and innovation in their respective markets.

How to Buy and Sell ETFs