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What is the story about?
With Union Budget 2026 less than two days away, India’s startup ecosystem is watching closely for signals that can unlock domestic risk capital, revive angel investing, and accelerate the country’s artificial intelligence ambitions.
After a year marked by tighter global funding, heightened compliance burdens, and sharper regulatory oversight, founders and investors say Budget 2026 must focus on enabling—not constraining—early-stage capital formation.
In a conversation with CNBC-TV18, Bruce Keith, Co-Founder & CEO of InvestorAi, and Addison Appu, Managing Partner of ThinKuvate, laid out what startups most want Finance Minister Nirmala Sitharaman to address.
Tax clarity and rationalisation top the wishlist
For Addison Appu, the single biggest headline he hopes to see from Budget 2026 is relief on the tax treatment of startup investments.
He argues that rationalising long-term capital gains (LTCG) and securities transaction tax (STT) is critical for investor confidence and income recognition.
Appu also flagged the need to revisit regulations around AIF accreditation, which he says has directly impacted angel participation.
“These are the two most important factors that we would definitely want the government to address,” he said.
Angel investing hit hard by September 2025 SEBI rules
One of the sharpest concerns raised was the decline in angel funding following SEBI’s September 2025 notification.
Appu pointed out that while the intent may have been investor protection, the outcome has been a shrinking pool of eligible angel investors.
From nearly three lakh high-income individuals, only about 649–700 have secured accreditation certificates so far, according to him.
With mandatory accreditation, net worth certification requirements, and rising compliance costs, angel funds—especially Category I AIFs—are finding it harder to operate efficiently.
“Angel investors want to support startups from TRL zero to TRL four stages,” Appu said, warning that excessive restrictions could choke early-stage innovation.
Family offices want flexibility, not forced exits
Another loud ask heading into Budget 2026 is unlocking domestic risk capital through family offices.
Appu said current SEBI co-investment rules discourage long-horizon investors because of rigid exit timelines tied to fund life cycles.
Family offices, he explained, often want strategic control and longer holding periods, but co-investment structures force them to exit within the five-to-eight-year fund threshold.
Key pain points include:
He urged policymakers to relook at these constraints to allow domestic capital to support startups through longer gestation cycles.
Founders don’t need offshore equity—but debt markets must deepen
Bruce Keith offered a more optimistic view of India’s equity funding environment, saying founders no longer need to chase offshore money to scale.
“I think the Indian equity funding ecosystem is really strong,” he said, drawing from his experience raising capital across three continents.
However, Keith believes the next phase of maturity must include stronger debt funding channels, so equity and debt can work in parallel as the ecosystem evolves.
“What I would like to see strengthen and grow is the debt funding side,” he added.
A big Budget push for foundational AI and academia linkages
Beyond capital and tax reforms, Keith emphasised that Budget 2026 should accelerate India’s AI innovation by supporting foundational, sector-specific models.
He called for deeper linkages between startups, academia, and centres of excellence.
“We need to strengthen the linkages with academia and the centres of excellence,” Keith said.
He also wants India’s Digital Public Infrastructure (DPI) to play a larger role in the foundational AI layer—so more startups can build applications on top of it.
“We’ve got the best startup ecosystem in the form of DPI… I’d like to see DPI play an even bigger role,” he noted.
Also Read | India considers expansion in definition of start-ups to promote innovation in deep-tech
Budget 2026: The startup ecosystem’s core asks
As Sitharaman prepares to present Budget 2026, startup founders and investors are looking for a clear roadmap built around:
For India’s startup ecosystem, Budget 2026 is being seen as a pivotal opportunity to restore early-stage momentum and position India as a global innovation hub—not just a capital recipient.
Watch accompanying video for entire discussion.
After a year marked by tighter global funding, heightened compliance burdens, and sharper regulatory oversight, founders and investors say Budget 2026 must focus on enabling—not constraining—early-stage capital formation.
In a conversation with CNBC-TV18, Bruce Keith, Co-Founder & CEO of InvestorAi, and Addison Appu, Managing Partner of ThinKuvate, laid out what startups most want Finance Minister Nirmala Sitharaman to address.
Tax clarity and rationalisation top the wishlist
For Addison Appu, the single biggest headline he hopes to see from Budget 2026 is relief on the tax treatment of startup investments.
He argues that rationalising long-term capital gains (LTCG) and securities transaction tax (STT) is critical for investor confidence and income recognition.
Appu also flagged the need to revisit regulations around AIF accreditation, which he says has directly impacted angel participation.
“These are the two most important factors that we would definitely want the government to address,” he said.
Angel investing hit hard by September 2025 SEBI rules
One of the sharpest concerns raised was the decline in angel funding following SEBI’s September 2025 notification.
Appu pointed out that while the intent may have been investor protection, the outcome has been a shrinking pool of eligible angel investors.
From nearly three lakh high-income individuals, only about 649–700 have secured accreditation certificates so far, according to him.
With mandatory accreditation, net worth certification requirements, and rising compliance costs, angel funds—especially Category I AIFs—are finding it harder to operate efficiently.
“Angel investors want to support startups from TRL zero to TRL four stages,” Appu said, warning that excessive restrictions could choke early-stage innovation.
Family offices want flexibility, not forced exits
Another loud ask heading into Budget 2026 is unlocking domestic risk capital through family offices.
Appu said current SEBI co-investment rules discourage long-horizon investors because of rigid exit timelines tied to fund life cycles.
Family offices, he explained, often want strategic control and longer holding periods, but co-investment structures force them to exit within the five-to-eight-year fund threshold.
Key pain points include:
- Mandatory investor accreditation
- The 3x investment cap relative to AIF stakes
- Exit restrictions limiting long-term ownership
He urged policymakers to relook at these constraints to allow domestic capital to support startups through longer gestation cycles.
Founders don’t need offshore equity—but debt markets must deepen
Bruce Keith offered a more optimistic view of India’s equity funding environment, saying founders no longer need to chase offshore money to scale.
“I think the Indian equity funding ecosystem is really strong,” he said, drawing from his experience raising capital across three continents.
However, Keith believes the next phase of maturity must include stronger debt funding channels, so equity and debt can work in parallel as the ecosystem evolves.
“What I would like to see strengthen and grow is the debt funding side,” he added.
A big Budget push for foundational AI and academia linkages
Beyond capital and tax reforms, Keith emphasised that Budget 2026 should accelerate India’s AI innovation by supporting foundational, sector-specific models.
He called for deeper linkages between startups, academia, and centres of excellence.
“We need to strengthen the linkages with academia and the centres of excellence,” Keith said.
He also wants India’s Digital Public Infrastructure (DPI) to play a larger role in the foundational AI layer—so more startups can build applications on top of it.
“We’ve got the best startup ecosystem in the form of DPI… I’d like to see DPI play an even bigger role,” he noted.
Also Read | India considers expansion in definition of start-ups to promote innovation in deep-tech
Budget 2026: The startup ecosystem’s core asks
As Sitharaman prepares to present Budget 2026, startup founders and investors are looking for a clear roadmap built around:
- LTCG and STT rationalisation
- Relaxation of mandatory angel accreditation norms
- Lower compliance burdens for angel funds and AIFs
- Reform of SEBI co-investment rules for family offices
- Expansion of domestic debt financing options
- Strategic investment in foundational AI and research linkages
For India’s startup ecosystem, Budget 2026 is being seen as a pivotal opportunity to restore early-stage momentum and position India as a global innovation hub—not just a capital recipient.
Watch accompanying video for entire discussion.
