Social media startup ShareChat’s valuation has fallen below $2 billion from nearly $5 billion following a new funding round, a source familiar with the situation told TechCrunch, marking a sharp drop for the company. 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 had raised $49 million in a convertible round. It did not disclose the valuation at which the funds were raised, but strongly denied that its new valuation was less than $2 billion, stating that 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. Its debt will be converted to equity at a valuation of less than $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 steep valuation cut.
ShareChat also counts Google, X, Snap, Tiger Global and Tencent among its sponsors. To date it has raised around $1.3 billion. ShareChat was valued at $4.9 billion in a funding round it raised in mid-2022.
The downgrade comes despite ShareChat experiencing a remarkably positive year, aggressively cutting expenses and managing to double its revenue. “When the market changed, we had to moderate [acquisitions and creator payments] and move towards more profitable growth,” Ankush Sachdeva, co-founder and CEO of ShareChat, told TechCrunch in an interview.
ShareChat hasn’t spent any money on acquiring users over the past year, and Sachdeva credits improvements to the startup’s content recommendation engine for driving 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 at the company as part of a special bonus grant.
It has also been able to reduce its biggest expense, the cost of delivering content, he said. “When you search for content in one of our apps, we do a lot of calculations to find the top 10 content. To serve and consume that, there is another shipping cost. Optimizing this has helped us reduce our consumption,” she said.
ShareChat has reduced its monthly cash burn by 90% over the past two years while doubling its revenue, attracting large consumer goods and gaming companies as advertisers.
The startup also 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, ours is smaller than Instagram and YouTube, but we are the biggest in terms of standalone app,” Sachdeva said. He believes ShareChat’s unique focus on live streaming as a destination for entertainment and connections between creators and users will differentiate it from its American rivals. The startup acquired local rival MX TakaTak in a deal valued at more than $700 million in 2022.
