Category I:

Funds which invest in StartUps, Small and Medium Enterprises (SMEs) and new businesses which have high growth potential and are considered socially and economically viable, are part of this category. The government promotes and incentivises investment in these projects as they have a  multiplier effect on the economy in terms of growth and job creation. These funds have been a lifeline to already thriving startups starving for capital.

Category I comprises the following funds:

1. Venture Capital Fund (VCF):
   Venture Capital Funds invest in StartUps which have high growth potential but are facing investment crunch in the initial phase and need funding to establish or expand their business.  Since it is difficult for new businesses and entrepreneurs to raise funding through the capital markets Venture Capital Funds become the most sought after solution for their financing needs.
   VCFs pool in money from investors who want to make equity investments in ventures. They invest in multiple startups, depending on their business profiles, assets’ size, and phase of product development. Unlike mutual funds or hedge funds, venture capital funds focus on early-stage investment. Each investor gets a share of the business the VCF has invested in proportional to their respective investment.
   High Net Worth Investors (HNIs) who seek high risk-high return investments options prefer to invest in VCFs. After the inclusion of VCFs in AIFs, HNIs from abroad are also able to invest in VCFs and contribute to the growth of the economy.
2. Infrastructure Fund(IF):
   The fund invests for the development of public assets such as road and rail infrastructure, airports, communication assets etc. Investors who are bullish on the infra development in the coming times can invest in the fund since the infrastructure sector has high barriers to entry and relatively low competition.
   Returns from investing in an Infrastructure Fund can be a combination of capital growth and dividend income. When an Infrastructure Fund invests in socially desirable/viable projects, the government may also extend tax benefits on such investments.
3. Angel Fund:
   This fund is a type of Venture Capital fund where fund managers pool money from numerous “angel” investors and invest in budding startups for their development. As and when the new businesses become lucrative, investors get the dividends.
   In the case of Angel Funds, units are issued to the angel investors. An “angel investor” refers to an individual who wants to invest in an angel fund and brings in business management experience, thus guiding the startup in the right direction. These investors typically invest in firms which are generally not funded by established venture capital funds because of their growth uncertainty.
4. Social Venture Fund:
   Socially responsible investing has led to the emergence of the Social Venture Fund (SVF) that typically invests in companies that have a strong social conscience and aim to bring a real change in the society.
   These companies focus on making profits and solve environmental as well as social issues simultaneously. Even though it is a kind of philanthropic investment, one can still expect returns because the firms would still make profits.
   Social Venture Fund generally invests in projects based out of developing countries as they have great potential for growth as well as social change. Such investments also bring the best managerial practices, technology and vast experience on the table which makes it a win-win deal for all stakeholders including investors, enterprises and society.