Why Category I Exists
SEBI created Category I specifically for funds that support economically and socially desirable activity: early-stage businesses, MSMEs, infrastructure and social ventures. In exchange, these funds receive a lighter regulatory touch than Category II or III.
The Sub-Types Inside Category I
- Venture Capital Funds: invest in early and growth-stage startups, typically unlisted.
- Angel Funds: pool capital from accredited angel investors to back very early-stage ventures.
- SME Funds: invest in small and medium enterprises, often unlisted or listed on SME exchanges.
- Infrastructure Funds: focus on infrastructure-linked assets and projects.
- Social Venture Funds: target measurable social impact alongside financial return.
Recent Update: Angel Funds Get a Faster, Lighter Path
Under the GARUDA framework approved on June 19, 2026, Angel Funds saw one of the most significant procedural upgrades in the entire AIF ecosystem.
Following a recent regulatory amendment, Angel Funds can now onboard only Accredited Investors, and can circulate their PPM and begin fundraising from the very day they receive SEBI registration. The merchant banker due diligence certificate has been replaced with a CEO and Compliance Officer undertaking, removing a traditional bottleneck in the launch process.
By The Numbers
- 1,849 total registered AIFs as of March 2026, across all categories
- 2,773 accredited investors nationally, up over 300% year-on-year
- 30% approximate 5-year CAGR across the overall AIF industry
Things To Consider
- Category I gets regulatory goodwill, not a free pass. Reporting and governance obligations remain real, even with lighter leverage restrictions.
- Accredited investor status is now central to Angel Fund strategy. With onboarding restricted to accredited investors, building that pipeline early matters.
- SME and infrastructure funds benefit from India's broader push toward domestic capital formation, reducing dependence on overseas fundraising.
Future Impact
As GARUDA matures and accredited investor participation keeps climbing (up over 300% in a single year), expect Category I, and Angel Funds especially, to become one of the fastest-moving parts of the AIF ecosystem, even if Category II continues to dominate by sheer capital volume.
Key Takeaways
- Category I covers VC, Angel, SME, Infrastructure and Social Venture funds.
- Angel Funds can now fundraise from day one of SEBI registration.
- Accredited investor growth (300%+ YoY) is the structural tailwind behind this category's next phase.
How Panchal S K and Associates Can Help
Setting up a Venture Capital, Angel or SME fund under Category I involves specific structuring choices most promoters miss. We guide founders and fund managers through registration, PPM drafting and accredited investor onboarding under the new GARUDA framework.
Reach out to Panchal S K and Associates for AIF structuring, SEBI registration, compliance and fund governance support.