Bangalore: With an aim to encourage entrepreneurship in the country by financing small startups, market regulator Securities and Exchange Board of India (SEBI) notified new norms for angel investors, who provide funding to companies at their initial stages.

Angel investors are allowed to be registered as Alternative Investment Funds (AIFs) -- a newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds, a gazette notification said.

In order to ensure investment by angel funds is genuine, the SEBI has restricted investment by such funds between Rs 50 lakh and Rs 5 crore.

Among other norms included, angel funds can make investments only in those companies which are incorporated in India. These funds needs to be invested in a firm for at least three years, can invest in companies not older than 3 years.

Further, investee company needs to be unlisted and with a maximum turnover of Rs 25 crore and this firm may not be related to a group with a revenue of more than Rs 300 crore.

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