SEBI AIF • DPIIT • FEMA
Venture Capital Funding in India
Navigate seed to Series B with SEBI AIF norms, DPIIT benefits, and market‑standard term sheets
Seed–Series B
Round Stages
AIF Cat I/II
Fund Types
Governance
Investor Rights
DPIIT/80‑IAC
Benefits
- Fund Vehicles
- SEBI AIF (Cat I/II/III)
- Ticket Range
- ₹2 Cr – ₹200 Cr+
- Instruments
- Equity • CCPS • CCD/SAFE
- Compliance
- Companies Act • FEMA • AIF
- Tax Relief
- 80‑IAC (3 yrs, eligibility)
- Process Time
- 6–12+ Weeks
01Overview
About Venture Capital
Venture capital in India is primarily routed through SEBI‑registered Alternative Investment Funds (AIFs) across Categories I, II, and III, with early‑stage deals typically led by Category I/II funds via equity or CCPS, and structured rights on governance and exits. DPIIT recognition and 80‑IAC tax holiday (subject to IMB) strengthen diligence readiness and investor confidence.
SEBI continues to refine AIF norms - covering registration, disclosures, valuation, borrowing/leverage, and manager qualifications - raising standards for transparency and investor protection across VC workflows. Founders should align data rooms, cap tables, ESOPs, and board processes to these expectations.
Term sheets in the current market emphasize liquidation preferences, anti‑dilution protections, information/inspection rights, and reserved matters, reflecting prudent risk management after recent cycles.
- 01
SEBI AIF Framework
Funds operate under SEBI AIF Regulations, 2012 (amended 2025): categories, disclosures, valuation, and reporting obligations.
- 02
Deal Instruments
Common structures include equity, CCPS, and CCD/convertible notes; SAFEs are adapted to Indian law and FEMA pricing when foreign money is involved.
- 03
Investor Protections
Market terms include liquidation preference (often participating), anti‑dilution (usually broad‑based weighted average), and reserved matters/board rights.
- 04
DPIIT & 80‑IAC
Recognition and profit deduction eligibility improve diligence outcomes, procurement access, and tax efficiency.
02Who can apply
Eligibility Criteria
Startup Readiness
3 points- DPIIT recognition, clean cap table, ESOP pool, statutory filings up to date.
- Validated PMF hypotheses, traction KPIs, and a defined GTM with unit economics.
- Data room: financial model, MIS/KPIs, cohorts, IP assignments, and key contracts.
Investor Channels
3 points- SEBI‑registered AIFs (Category I/II/III) and strategic co‑investors.
- Legacy VCFs migrating to AIF regime by July 2025 (where applicable).
- Follow‑on capital pathways via multi‑stage funds and cross‑border investors within FEMA norms.
Compliance & Tax
3 points- Companies Act actions (board/shareholder approvals) and AOA alignment for investor rights.
- FEMA pricing/valuation for foreign inflows; MCA/RBI filings (PAS‑3, FC‑GPR) on time.
- 80‑IAC profit deduction (3 years) subject to IMB and extended eligibility window.
03Paperwork
Required Documents
0 / 9 ready
Tick the documents you already have
Corporate & Recognition
Round & Valuation
Regulatory Filings
04Step by step
Application Process
- 01
Prepare & Target
1–2 WeeksAlign data room, recognition, and governance; shortlist funds that match stage, sector, and cheque size.
Warm introductions improve hit‑rate.
- 02
Term Sheet
1–3 WeeksNegotiate valuation, liquidation preference, anti‑dilution, ESOP refresh, and board/observer rights.
Aim for broad‑based weighted average anti‑dilution.
- 03
Diligence & Docs
3–6 WeeksComplete legal/financial diligence; finalize SSA/SHA; secure regulatory approvals where needed.
Foreign money requires FEMA pricing support and filings.
- 04
Close & Comply
1–2 WeeksAllot securities, update registers, file PAS‑3/FC‑GPR, and institute MIS cadence and reserved matters governance.
Maintain compliance artifacts for audits/investor reviews.
05Why it's worth it
Key Benefits
Scale Capital
Larger cheques for GTM, product, and team; staged reserves for follow‑ons.
- Milestone‑based
- Follow‑on ready
- Network access
Governance Uplift
Board/observer, information rights, and controls improve execution discipline.
- KPIs/MIS
- Reserved matters
- Audit cadence
Institutional Access
SEBI AIF regime standardizes disclosures, valuation, and reporting for investor comfort.
- PPM
- Reporting
- Valuation
Tax Incentives
DPIIT recognition and 80‑IAC profit deduction eligibility enhance runway post‑profitability.
- 3‑year window
- IMB approval
- Extended eligibility
06Questions
Frequently Asked Questions
- Early‑stage VC typically operates via Category I or II AIFs; Category III is used for hedge/long‑short strategies with leverage constraints.
- Participating liquidation preference, broad‑based weighted average anti‑dilution, pre‑emptive rights, information rights, and reserved matters.
- Companies Act forms (PAS‑3/SH‑7) and RBI’s FC‑GPR for foreign inflows, plus register updates and board/ESOP actions.
- Yes. Recognition and 80‑IAC eligibility boost diligence readiness and post‑profit tax efficiency, with eligibility window extended up to April 2030 incorporations.
- From first meeting to money‑in‑bank, expect 6–12+ weeks depending on diligence scope, cross‑border flows, and approvals.
How much runway do you have?
Move the sliders to see when your cash runs out — and when to start raising.
Runway Planner
How long does your cash really last?
Your runway
14 months
Comfortable runway
Use the time to hit the milestones that make the next round an easy yes.
Real outcomes
Success Stories
“Closed a Cat‑II AIF‑led seed with clear MIS and unit economics; governance cadence accelerated enterprise wins.”
ShipKartLogistics SaaSFunded: ₹12 Crore“Participating liquidation preference and milestone tranches aligned risk sharing and execution focus.”
BioNovaMed‑DiagnosticsFunded: ₹40 Crore“Cross‑border co‑investment complied with FEMA pricing; follow‑on secured from the same AIF platform.”
EcoGridClean Energy IOTFunded: ₹85 Crore
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