Social media startup ShareChat’s value has fallen from nearly $5 billion to under $2 billion in a new funding round, a source familiar with the situation told TechCrunch. This represents a sharp decline for the nine-year-old Indian startup with over 400 million users in the South Asian market.
The Bengaluru-based startup, which runs a popular social network that supports a dozen Indian languages as well as a short-video app, said on Monday it has raised $49 million in a convertible round. The valuation at which the funds were raised was not disclosed, but it strongly denied that the new valuation was below $2 billion and claimed that there was “no valuation” associated with the round.
Existing investors such as Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures and HarbourVest invested in the new round, the startup said. According to a source with direct knowledge of the terms, its debt will be converted into equity in the next round with a value of under $2 billion. The source requested anonymity to speak candidly. TechCrunch reported in December that ShareChat was facing a sharp drop in valuation.
ShareChat also counts Google, X, Snap, Tiger Global and Tencent among its supporters. Around $1.75 billion has been raised so far. ShareChat was valued at $4.9 billion in a funding round raised in mid-2022.
The discount comes even as ShareChat enjoyed a remarkably positive year in which the company dramatically reduced its expenses while doubling its revenue. “When the market turned, we had to ease up [acquisitions and creator payments] and move towards more profitable growth,” said Ankush Sachdeva, co-founder and CEO of ShareChat, in an interview with TechCrunch.
ShareChat hasn’t spent any money on user acquisition over the past year, with Sachdeva crediting improvements to the startup’s content recommendation engine for driving user retention and engagement. The company has also invested heavily in AI talent, particularly in senior positions in its London-based team. ShareChat also announced that it has doubled the ESOP grant for every employee in the company as part of a special bonus grant.
It also managed to reduce the single largest expense, the cost of delivering content, he said. “When you access content in one of our apps, we do a lot of calculations to find the top 10 pieces of content. Additional shipping costs apply for serving and consumption. The optimization helped us reduce our consumption,” he said.
ShareChat has reduced its monthly cash burn by 90% in the last two years while doubling revenue, attracting major FMCG firms and gaming companies as advertisers.
The startup remains committed to the short video market in India, despite strong competition from YouTube and Instagram following the ban of TikTok in the country in 2020.
“In terms of traffic, our traffic is less than Instagram and YouTube, but when it comes to a standalone app, we are the biggest,” said Sachdeva. He believes ShareChat’s unique focus on live streaming as a destination for entertainment and creator-user connections will set the company apart from American competitors. The startup acquired local rival MX TakaTak in 2022 in a deal worth over $700 million.