The Angel investments in India is X times behind the USA

How the India story differs from the USA saga?

The world’s oldest democracy is the world’s largest economy. The world’s largest
democracy is the world’s third largest entrepreneurial hub and a front-runner in the money race. In the recent times, economies all around the globe have witnessed innovative reforms carving legroom for the new age entrepreneurship to flourish. And despite the crashing markets, these new age ideas have survived and up surged.

Certainly, the world today is riding on the startup ships, sailing in erratic time zones.
However, be it the oldest or the largest, both USA and India have shown the mettle to
sustain such an ecosystem. With the Silicon Valley catering to the largest number of world’s premier tech giants followed by the China and the India respectively, these companies have led to the mammoth influx of capitals (owing the utmost credits to the Angel Investments which have leveraged the impacts).

Angel investors are the informal investors with a high net-worth; who invest their capital and advice in an idea (generally small startups), at a very early stage and might expect convertible debt or ownership equity in exchange.

Though, it’s hard to survey the net worth of the Angel Investments in USA than anywhere else due to its massive size, the total amount invested by angel investors in USA in 2014 was $24.8B as compared to India’s ~$5B. Such a gorge in the data reflects how young and undersized India’s startup economy is as compared to USA’s.

There are more than 300,000 angel investors in USA as compared to the little size in India, which widens the opportunities for the startups there. This difference emerges due to the mammoth size of the America’s economy and the taxation and policy exemptions for the angel investors. For instance, The SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI), levies 30% tax on the angel investors, for any amount that exceeds accounting laws of a fair market valuation. This holds back the influx of investments as it creates the unnecessary costs and annoyance for the startups.

However, this when compared to the US model, the federal government there proffers up to 100% tax exclusions (for stocks purchased before Feb, 2010) and 50% tax exclusion (for stocks purchased in 2014). The tax exemptions in India are way too low.

True, the India’s economic policies (as backed by many), seems to follow the correct trails yet there are areas where we might never catch up. For example, the infrastructure, internet penetration etc. Such factors hinder the growth rate of the young startups and reduce the trust of the investors in the economy.


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