An investor-interest warning notice issued by capital market regulator the Securities and Exchange Board of India (Sebi) has questioned the very legality of equity crowdfunding platforms serving startup companies.
The Sebi note, issued last week, has virtually pronounced over half-a-dozen digital equity crowdfunding platforms (ECP), including prominent ones like Grex, LetsVenture, Termsheet, Equity Crest and Tracxn, as unauthorized, unregulated and illegal. Sebi, more specifically, has also asked Grex Alternative Investments Market (Grex), a two-year old crowd-funding platform, to stop “on-boarding” new investors or taking up fund raising mandates from startups, it is reliably learnt.
Such platforms have emerged as a new source of funding for startups. Close to 200 companies have raised Rs 350-450 crore on these platforms over the past 18 months, according to industry estimates
According to Sebi, only recognized stock exchanges can provide electronic platforms where equity and other corporate securities could be listed and traded. Incidentally, Sebi diktat comes at a time when ECPs are doing brisk business – enlisting more angel investors and raising “small working capital” (average ticket size:Rs 50 lakh to Rs 6 crore) for startups.
By EB Bureau
