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Industry expert flags concern about slowdown in angel investment and seed funding


Industry expert flags concern about slowdown in angel investment and seed funding
R Chandrashekhar said that 2018 was a pretty good year for the start-up industry because investments were the highest ever.

An Information Technology (IT) industry expert has expressed concern over angel investment and seed funding going down, cautioning that this trend would have a negative impact on the growth of the startup ecosystem. Former President of NASSCOM (National Association of Software and Services companies), R Chandrashekhar said that 2018 was a pretty good year for the start-up industry because investments were the highest ever.

"But the bulk of investment went into large players rather than in seeding and starting small companies, which is very important to that ecosystem," he said and cautioned that the impact of anything negative would be felt in the space over time. More than 1,200 startups came up in 2018 and the number of deep-tech ones, in fact, doubled over the previous year, he said.

"But slight areas of concern would be that while the total quantum of investment (in the startup space) has gone up, the angel investing and seed funding, which is the early stage, has actually gone down significantly", Chandrashekhar told PTI. In fact, in 2017 angel investment and seed funding went down by 50 per cent, he said, adding, "But after that (in 2018), we have not seen a big uptick in the momentum". "Very aggressive moves by tax authorities on the angel tax in recent times is certainly a further dampener to an area which is already under pressure, an area of concern even before that", Chandrashekhar said.

"So the concern would be that this may actually be in the sense quite detrimental to the startup ecosystem. Recent steps are certainly also negative in terms of impact", he said. Commerce and Industry Minister Suresh Prabhu recently asked his finance counterpart Arun Jaitley to resolve taxation issues being faced by startups getting angel funds in the wake of several startups and angel investors raising concerns over notices received from income tax authorities.

(With inputs from agencies.)

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