Catch 22: The annoying funding conundrum that most startup founders face these days in India
17 April 2019 1:22 AM GMT
So, we?ve been trying to raise funds for our kicking off our�startup. The last two months have been a revelation in how convoluted rules and regulations come together to create an incredible Catch-22 situation in raising funds.Get latest Entrepreneurship online at cnbctv18.com
- Since anyone below Rs 25 lakh does not qualify as an angel investor, we are raising funds under the "private placement" process.
- Section 56(2)(viib) of the Income-tax Act, 1961 - (in)famously known as the Angel Tax Act , but applicable to any individual (non-VC) investments - allows startups to raise money from investors BELOW the "fair market value" as determined by a merchant banker.
- So, if we have to raise investments, we should: Get a merchant banker valuation report that defines our startup's valuation (say, a valuation of Rs.
- X crore) Raise investments at a value below this valuation (ie.
- I know you are saying the angel tax exemption will help, but it really doesn't.
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