There are finfluencers (financial influencers) who influence people on social media platforms about which mutual fund to invest in, which stocks to buy, which IPO to buy, what’s the market trend etc. Finfluencers generating content on financial topics, are rapidly rising in popularity on social media. Many finfluencers earn a lot, even lakhs, by making videos on initial public offers and posting them on social media platforms. Most important fact is they are totally nobody. There is no reason to listen to them. They are just social media personality that give quotes, life lessons and business advice which they take from Google and based on which they give business advice. In short, they deceive their followers.

A finfluencer usually promotes a broking firm by adding a link to open an account. They get a commission for each account opened using that link; some even get a share of the firm’s earnings from these accounts.

In June 2024, the Securities and Exchange Board of India (Sebi) has taken a bold step by banning regulated entities from getting associated with unregistered finfluencers. This crackdown targets anyone who provides financial advice or makes claims about securities without Sebi’s registration. Earlier, Sebi had noted concerns about finfluencers promoting some of the IPOs falsely instead of objectively informing the investors of its merits and risks. People invest their hard-earned money into various financial products with having actual information. 

SEBI’S new regulations create a distinct separation between qualified financial advisors and unregulated online influencers. Regulated entities such as brokers, mutual fund houses, research analysts and financial advisors are now strictly prohibited association with unregistered finfluencers. This ban includes partnerships for marketing purposes, sharing client information, or receiving financial benefits from their activities. Sebi is also establishing a secure payment system for registered investment advisors (IAs) and research analysts (RAs) to collect fees from their clients. This ensures that investor payments are directed only to authorised professionals, making it easier for investors to distinguish between registered IAs/RAs and unregistered finfluencers.

Younger people are increasingly turning to content on platforms such as TikTok as they are more aware of their personal finances, with #fintok currently at 927.8 million views. The influencers often share their personal financial journeys, offer financial literacy education, and promote various financial products and services. They may collaborate with financial institutions, promote budgeting apps, or review investment options. Like other influencers, they can monetize their influence through sponsored content, affiliate marketing, and other means.

There is high appeal in financial information that comes in bitesize, light-hearted formats and Gen Z and millennials are turning to finfluencers to improve their financial education and boost financial literacy levels.

Sebi’s move addresses the troubling alliance between market intermediaries and shady influencers. ‘Finfluencers’ have been linked to discount brokers, driving up trading activity and often misleading investors with false profit claims on platforms like YouTube and Telegram.

Finfluencers have played an impactful role in spreading financial awareness and motivating investors to actively participate in the finance market. However, their activities remain unregulated, posing risks to investors. Some famous finfluencers are Shaunak Udupa who enjoys 150k subscribers, Rachana Ranade with 4 million subscribers, Anushka Rathod enjoys 17.3k subscribers, Sharan Hegde 1.1.k subscribers.  

Recently, the Securities and Exchange Board of India (SEBI) has taken a stern stance against a social media influencer, Mohammad Nasiruddin Ansari, widely known as ‘Baap of Chart.’ Recently, SEBI imposed a ban on Ansari from the securities market, accompanied by a substantial fine of Rs 17.2 crore.  Ansari is the sole proprietor of the firm Baap of Chart (BoC). He promoted himself as a stock market expert on various social media platforms and invited investors/ clients to enrol for various “educational courses” offered by him. According to SEBI’s order, Ansari marketed his stock recommendations as educational training, but he was trying to sell them. Ansari is a self-proclaimed investment expert who used to provide stock recommendations under the moniker ‘Baap of Chart’ through platforms like X, Telegram, and YouTube. However, his actions did not go unnoticed by SEBI. Along with his associate Rahul Rao Padamati and their company Golden Syndicate Ventures, Ansari has been barred by SEBI until further notice.

Market regulator Securities and Exchange Board of India has issued a draft circular in which it has asked companies that are coming out with a public issue to include audiovisual (AV) presentation of disclosures made in their offer documents for interested investors. In the draft circular dated March 19, the regulator said that the IPO’s AV presentation should start with a disclaimer that investors must not rely on any other content, such as those made by finfluencers, and that the lead managers of the issue be responsible for the content and information made available on the AV. Sebi said: investors are advised not to rely on any other document, content or information provided on the offer on the internet/online websites/social media platforms/micro-blogging platforms and by the finfluencers since the same is not approved/commissioned/paid by the company or its promoters/directors/KMP (key managerial personnel) in any manner.

By this move, SEBI wants to eliminate unregistered finfluencers providing illegal investment advice through social media channels. Restrictions have been imposed on intermediaries, such as brokers and mutual funds, from engaging unregistered finfluencers for product promotion. The rise of finfluencers signals that people have money to invest.

Angel investors, banks, incubators, and other financial institutions are flooded with thousands of applications, quite of few of these large numbers may not be serious contenders but they send their applications and block chances of serious aspirants. Smaller capital requirements are over looked by venture capitalists and many investors, capital requirements from 2-5 crores range are mostly entertained. There are quite a few ventures with smaller requirements of seed capital. They are not entertained because of their smaller requirements. Where do they go?

Who is an Angel Investor? An angel investor who is also known as a business angel, informal investor, angel funder, private investor, or seed investor is an affluent individual who provides capital for a business start-ups, usually in exchange for convertible debt or ownership equity. Many times Angel investors are amid known people of the entrepreneur’s family and friends. The capital angel investors provide may be a one-time investment to help the business propel or an ongoing injection of money to support and carry the company through its difficult early stages. Sometimes angel investors prefer investing through crowd-funding platform in a business.

Angel investors provide more favourable terms compared to other lenders, since they usually invest in the entrepreneur starting the business rather than the viability of the business. Angel investors are focused on helping start-ups take their first steps, rather than the possible profit they may get from the business. Essentially, angel investors are the contrary of venture capitalists. Venture capitalists look for a strong management team, a large potential market and a unique product or service with a strong competitive advantage. They also look for opportunities in industries that they are familiar with, and the chance to own a large percentage of the company so that they can influence its direction.

Origins of Angel Investors: The term “angel” came from the Broadway theatre, when wealthy individuals gave money to propel theatrical productions. The term “angel investor” was first used by the University of New Hampshire’s William Wetzel, founder of the Centre for Venture Research. Wetzel completed a study on how entrepreneurs gathered capital.

Who Can Be Angel Investors: People who meet the Securities Exchange Commission’s (SEC) standards for accredited investors can become angel investors. To become an angel investor, one must have a minimum net worth of $1 million and an annual income of $200,000.

Source of Funding: Angel investors typically use their own money, unlike venture capitalists that take care of pooled money from many other investors and place them in a strategically managed fund. Though angel investors usually represent individuals, the entity that actually provides the fund may be a limited liability company, a business, a trust or an investment fund, among many other kinds of vehicles.

Angel investors who seed start-ups that fail during their early stages lose their investments completely. This is why professional angel investors look for opportunities for a defined exit strategy, acquisitions or initial public offering (IPO).

The effective internal rate of returns for a successful portfolio for angel investors ranges from 20 to 30%. Though this may look good for investors and seem too expensive for entrepreneurs with early-stage businesses, cheaper sources of financing such as banks are not usually available for such business ventures. This makes angel investments perfect for entrepreneurs who are still financially struggling during the start-up phase of their business.

Globally some of the famous angel investors are Jeff Bezos, Paul Buchheit, Jeff Clavie, David Lee, Benjamin Ling, Dave Morin, Keith Rabois and Aydin Senkat.

Some famous Indian angel investors are:

Anupam Gopal Mittal: Founder and CEO of People Group, which owns matrimonial portal shaadi.com, realty portal makaan.com, and mobile media company Mauj Mobile, Mittal is an angel investor in over 50 startups. He was among the most active angels in India in 2015, investing in 12 start-ups. Anupam likes to back businesses that have huge market potential backed by a strong, knowledgeable core team.

Sanjay Mehta: An active member of four prolific investment groups—Indian Angel Network, Mumbai Angels, B2B 1K Ventures, and Venture Nursery—Mehta has a portfolio of over 40 startups. His investments are mostly in big data, marketing automation, and consumer services.

Zishaan Hayath: A serial entrepreneur (someone who starts and leads one business after another or, multiple businesses at the same time), Hayath began making angel investments in 2011 with Ola, Uber’s competitor in India. He now holds over 30 start-up investments and runs an angel investment group called Powai Lake Ventures.

Angel investors are in demand: We need many more angel investors. Investing in start-ups can yield good return on capital when they understand the dynamics of the asset class, yet only few individuals have become angel investors in India. Experienced entrepreneurs, successful businessmen and senior professionals have the ability to invest modest sums in start-ups. Ideally, they should co-invest small sums in start-ups.

We need to create some forums to help bring more individuals into the angel-investing arena. We need to invest time to create platforms to educate potential angel investors and guide them about angel investing. One big glaring fact is India and many developing countries need to encourage entrepreneurship, which is indeed need of the hour. We need more and more entrepreneurial ventures. We need innovations to make our life simpler, fill the gaps in development of the country in areas like infrastructure, energy, education and healthcare. And, unless we are able to provide seed-capital to deserving entrepreneurs, we will have 1000s of frustrated individuals, who could have otherwise created large businesses, millions of jobs and overall help the country to prosper.