The valuation of social networking startup ShareChat has fallen below $2 billion from nearly $5 billion after a new round of funding, a source familiar with the situation told TechCrunch, marking a sharp decline for the nine-year-old Indian startup that has more than 400 million users in the South Asian market.
The Bengaluru-based startup, which operates a popular social network that supports a dozen Indian languages as well as a short-form video app, announced on Monday that it has raised $49 million in a convertible round. It did not disclose the valuation at which the funds were raised, but flatly denied that its new valuation was below $2 billion, claiming there was “no valuation” attached to the round.
Existing investors including Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures and HarbourVest have invested in the new round, the startup said. Their debt will be converted to equity at a valuation below $2 billion in the next round, according to a source with direct knowledge of the terms. The source requested anonymity to speak candidly. TechCrunch reported in December that ShareChat was facing a sharp valuation cut.
ShareChat also counts Google, X, Snap, Tiger Global and Tencent as its backers. It has raised about $1.3 billion to date. ShareChat was valued at $4.9 billion in a funding round it raised in mid-2022.
The decline comes despite ShareChat having had an extremely positive year, aggressively cutting expenses while managing to double its revenue. “When the market turned, they had to moderate [acquisitions and creator payments] and move towards more profitable growth,” Ankush Sachdeva, co-founder and CEO of ShareChat, told TechCrunch.
ShareChat hasn’t spent money on user acquisition in the past year, with Sachdeva crediting improvements to the startup’s content recommendation engine for boosting user retention and engagement. The company has also invested heavily in AI talent, particularly for senior roles in its London-based team. ShareChat also revealed that it has doubled the ESOP grant for every employee in the company as part of a special bonus grant.
It has also been able to reduce its biggest expense, the cost of serving content, it said. “When you retrieve content in one of our apps, we do a lot of calculations to find the 10 best content. To serve and consume it, there is another delivery cost. Optimizing that helped us reduce our burn,” he said.
ShareChat has reduced its monthly cash burn by 90% in the past two years while doubling revenue by attracting major FMCG companies and gaming companies as advertisers.
The startup also remains committed to the short-form video market in India, despite stiff competition from YouTube and Instagram after TikTok was banned from the country in 2020.
“In terms of traffic, ours is lower than Instagram and YouTube, but we are the biggest in terms of a standalone app,” Sachdeva said. He believes ShareChat’s unique focus on live streaming as a destination for entertainment and creator-user connections will differentiate it from American rivals. The startup acquired local MX rival TakaTak in a deal worth more than $700 million in 2022.
