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5 hours ago
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Five to ten years ago, a ₹10 lakh cheque and a compelling conversation were often all it took to land a spot on a founder’s cap table. Solo angel investors—senior professionals, operators, or startup enthusiasts—were key to building the early tech scene. They were fast, informal, and willing to bet early…before the market validated the opportunity. Success stories such as Flipkart, Ola and InMobi got their initial support from such individuals, especially when VCs were still hesitant.
That era appears to be fading.
The lone cheque is no longer the unit of currency it once was. As early-stage funding becomes more institutionalised, solo investors are being squeezed out by pooled capital, platform syndicates and microfunds. The rules of engagement have changed and the solo angel is now playing on a narrower field.
The dark secret of the industry is that at a Series B / Series C, in several companies, Angel investors get booted off the cap table to make way for the big boys.
No one talks about it publicly — the Angels try to not create a scene (don’t want to cause problems for the founder & for themselves in the long run). The founders are forced to brush this below the carpet.
Excerpt from Rahul Mathur’s The exit paradox for Angel Investors
Seed rounds today aren’t what they were a decade ago. ₹4–6 crore rounds are now common. Founders, no longer capital-starved, want structure over scatter. Managing 20–30 individuals on the cap table, each with their timelines and terms, is inefficient and error-prone. Founders increasingly prefer raising from one or two leads, or from structured pools that offer a single cheque, clean terms and a unified interface.
Even when solo angels invest early, they rarely lead rounds. They don’t get pro-rata rights, board seats, or regular updates. As institutional money flows in, early angels often get diluted into irrelevance. Lead funds get the secondaries, key updates leave them out, and during the exit, they’re lucky to be in the conversation.
It’s not theoretical. In 2023, a prominent edtech company—after raising $800M—explored a down-round transaction. With multiple preference layers in the capital stack, early angels holding common equity were set to walk away with nothing unless the deal price far exceeded the invested capital. That’s becoming increasingly common.
Don’t take our word for it. Angel investors own up to the mistakes they’ve made along the journey, encapsulating both of these concerns:
Taking too long to commit or perform diligence - Best founders have optionality & will move fast. Capital is truly just a commodity in today’s market - the best founders will see insane inbound (from scouts, analysts, and funds) and sometimes have their rounds fully subscribed even before they’re in the market.
Not participating in pro-rata and getting diluted in my winners - a potential 50xr can very quickly become a 25x after dilution then you have 20% carry and taxation on top of that..so overall your returns aren’t as spectacular.
- Excerpt from Shrishti Sahu’s 10 Mistakes I made as an Angel investor
Venture capital is governed by a power law wherein a handful of startups generate most of the returns. Therefore, success isn’t about picking the right company - it’s about having enough bets to even have a shot at the outlier.
This is where solo angels often fall short.
Most deploy into a small number of companies over many years. Even assuming better-than-average judgment, the odds of hitting a unicorn are statistically low. Many believe they can “just pick the winners.” That’s comforting. But it’s also a fallacy.
Angel funds and micro-VCs operate differently. They optimise for volume, structure, and follow-on access. They get rights that matter, participate in secondaries, and benefit from compounding. They're not just placing bets, they’re essentially building a system around optionality.
The math of venture doesn’t reward lone conviction and this impacts the participation rates amongst angels, which has visibly declined in the past 3 years.
A large part of the shift has also been driven by regulation. In 2023, India temporarily expanded the scope of the so-called “angel tax” to include foreign investors. Though the policy was reversed the following year, its impact has lingered. Startups and investors experienced valuation scrutiny and compliance complexity. They got the indication that informal or lightly governed capital flows would attract greater oversight. Other restrictions remain in place. FEMA requires a minimum ₹25 lakh investment from foreign investors using convertible notes. New tax deduction rules apply to transfers of unlisted shares, requiring buyers to withhold tax at the time of the transaction. These policies raise the compliance threshold for participation, especially for smaller or offshore angels investing independently. While none of these changes prohibit angel activity, they create enough friction to change behaviour.
It is not surprising that startups began avoiding fragmented cap tables and leaning towards structured deals. Institutional LPs and downstream acquirers prefer clean structures. Regulation didn’t outlaw solo angels, but it amplified the cost of dealing with them.
SEBI’s new rules on investor accreditation are expected to further professionalise angel investing by prioritising verified, high-quality investors. This opens the door to larger, faster early-stage rounds through more structured angel funds.
SEBI now mandates that all angel investors investing in AIFs must be accredited. This means angels will need to go through a stricter, independently verified process, with updated financial thresholds that match today’s market realities. On the plus side, SEBI has eased investment limits and removed caps on the number of accredited investors per deal.
The effort to streamline the rules for angel funds investing in AIFs is a notable shift. How it shapes angel activity and fund participation in AIFs remains to be seen.
Apurv Sardeshmukh (MD and Founder at Stride Legal)
We believe it marks a shift from informal club deals to a scalable, institutional-style ecosystem. Supporters believe that this accreditation framework will filter out casual investors and elevate the bar for participation. With relaxed caps and QIB status, angel funds can raise and deploy capital more aggressively. This positions India’s angel market for greater scale, trust, and global alignment. But it is not all sunshine and rainbows.
This shift may substantially narrow the investor pool. The accredited investor framework could exclude seasoned investors with early-stage investment experience and senior management professionals with over 10 years of experience who currently qualify under existing criteria but may not meet the stricter financial thresholds required for accreditation. This represents a fundamental trade-off between enhanced investor protection and reduced market accessibility for angel funding, potentially limiting capital flow to startups.
Parth Gala (Co-founder, Navigate AIF)
Over 200 syndicates, rolling funds, and CAT I angel funds have launched in India in the past five years. Many are run by ex-solo angels who realised scale, structure, and follow-on mattered more than being “early.”
As Aman Tekriwal, a seasoned angel investor and co-founder of Maxar.VC puts it:
Angel investors are better off investing as a part of a group—e.g., Cat 1 angel fund—where they have the option of choosing the opportunities on a deal-by-deal basis and also benefit from the portfolio management, compliance, legal, and allied services provided by the angel fund manager for a small cost. Also, this spares the founder and the company from the hassle of managing a large number of individual investors.
It’s not just more capital. It’s better-organised capital.
Even seasoned angel investors who have been doing it for more than a decade and have invested in 40+ companies feel the fatigue.
Unlike VCs, who are compensated for their work through management fees, angels do it for free while also taking 100% of the financial risk. Angel investors also face the longest time horizon for liquidity of any investor. Private equity aims for 3-5 year returns, and VCs typically run 7-10 year fund cycles, but angels usually wait 10+ years for exits.
- Excerpt from Halle Tecco’s interview with Oscar co-founder Mario Schlosser
This isn’t the death of angel investing. It’s a redefinition.
Founders want fewer cheques, not more. Funds want control, not clutter. Platforms want scale, not serendipity. And solo angels? They’re being left out—not for lack of conviction, but for lack of structure.
So, where does that leave us?
Are we institutionalising early-stage capital to the point of closing the door on new believers? If serendipitous cheques are no longer welcome, who will take the leap of faith on unproven founders?
In filtering by accreditation and cheque size, are we also filtering out operational insight and long-term commitment?
And if capital formation is only possible through funds and platforms, is India’s startup ecosystem still founder-led, or funder-shaped?
We’ll leave you with that thought.
