Category I — Venture, Angel, SME, Social Impact, Infrastructure and Special Situation Funds
Category I covers six kinds of AIF: venture capital, angel, SME, social impact, infrastructure and special situation funds. This lesson explains how the Regulations describe the category, what changed in 2022, the special rules for angel funds, and the other limits and the risks of the category.
What belongs in Category I
Category I AIFs are venture capital funds, angel funds, SME funds, social impact funds, infrastructure funds and special situation funds. The names indicate where each invests: for example, SME funds in small and medium enterprises, infrastructure funds in infrastructure, and special situation funds in stressed assets.
The Regulations describe the category as funds with positive spillover effects on the economy, for which SEBI or the Government might consider incentives or concessions. That is a description of the category. It does not itself grant any incentive or concession.
Two changes from 2022
Two features of today's list date from 2022. 'Social venture funds' were renamed 'social impact funds', so older material may still use the earlier name for the same sub-category.
Special situation funds were added in the same year. They invest in stressed assets and are a sub-category of Category I, not of Category II.
Angel funds
Angel funds have tighter rules on who may invest. An angel fund may now raise money only from accredited investors, meaning investors who hold an accreditation certificate after meeting SEBI's income or net-worth tests. Angel funds registered on or before 10 September 2025 have until 31 March 2027 to comply.
There is also a ceiling on each investment. An angel fund may invest at most ₹25 crore in one investee company, and that figure includes follow-on investments in the same company.
Other rules for Category I funds
Category I funds are close-ended with a minimum tenure of three years, and may not borrow except to meet temporary funding needs.
Category I funds other than angel funds may invest not more than 25% of investable funds in one investee company, and their sponsor or manager must keep a continuing interest in the fund of 2.5% of the corpus or ₹5 crore, whichever is lower, so those running the fund have their own money at risk alongside investors. These two rules do not apply to angel funds. Angel funds follow separate limits of their own: the ₹25 crore ceiling described above is one, and the others are not covered here.
The risks are real. Investee businesses and projects can fail, units of a close-ended fund cannot be redeemed at will, unlisted holdings are hard to value, and capital can be lost.
Rules at a glance
An angel fund's ceiling
The figures here are invented for arithmetic only. An angel fund has invested ₹18 crore in a young company. The company later raises more money, and the fund wants to take part in the new round.
The ceiling is ₹25 crore in one investee company, including follow-on investments. The most the fund can add is therefore ₹25 crore − ₹18 crore = ₹7 crore. The ceiling limits how much goes into one company. It does not make the investment safe: the company can still fail, and the fund's investors can lose capital.
Key points
- Category I: venture capital, angel, SME, social impact, infrastructure and special situation funds.
- The Regulations describe the category as funds with positive spillover effects on the economy; the description itself grants no incentive or concession.
- Since 2022 'social venture funds' are called 'social impact funds', and special situation funds are part of Category I.
- Angel funds may raise money only from accredited investors and may invest at most ₹25 crore in one investee company, including follow-on investments.
- Category I funds are close-ended with a minimum tenure of three years; risks include investee failure, illiquidity and loss of capital.
Common misunderstandings
- Special situation funds are not Category II: they invest in stressed assets and are a sub-category of Category I, added in 2022.
- 'Social venture fund' is not a separate sub-category: since 2022 the Regulations call these funds social impact funds.
- The 'positive spillover' description does not carry automatic benefits: SEBI or the Government might consider incentives or concessions, but the description grants none.
- The ₹25 crore ceiling for angel funds is not per round: it covers the total invested in one investee company, including follow-on investments.
Questions people ask
From whom may an angel fund raise money?
Only from accredited investors. Angel funds registered on or before 10 September 2025 have until 31 March 2027 to comply with this rule.
Is a special situation fund a Category I or a Category II AIF?
Category I. Special situation funds, which invest in stressed assets, were added to Category I in 2022. Private equity and real estate funds are Category II.
Does the low ₹1,000 minimum apply to all social impact funds?
No. The ₹1,000 minimum for individual investors applies only to a social impact fund investing solely in non-profit organisations on a social stock exchange.
What this lesson relies on
- SEBI (Alternative Investment Funds) Regulations, 2012 (as amended to 14 July 2026)
- SEBI Master Circular for Alternative Investment Funds, 3 June 2026 (as updated 7 September 2026)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.