ShareChat, a social media startup, has seen its valuation drop to $2 billion from almost $5 billion after a recent funding round, according to a source familiar with the matter. This represents a significant decline for the nine-year-old Indian startup, which has amassed over 400 million users in the South Asian market.
The Bengaluru-based startup announced on Monday that it had successfully raised $49 million in a convertible round. The company operates a popular social network that supports a wide range of Indian languages and also offers a short-form video app. The company did not reveal the exact valuation of the funds raised, but it firmly stated that its new valuation was not below $2 billion. It emphasized that the funding round did not have a specific valuation.
The new round saw contributions from existing investors, such as Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures, and HarbourVest, according to the startup. According to a source with direct knowledge of the terms who requested anonymity, their debt will convert to equity in the next round at a valuation below $2 billion. In December, Eltrys reported that ShareChat was experiencing a significant decrease in its valuation.
ShareChat has an impressive list of backers, including Google, X, Snap, Tiger Global, and Tencent. It has accumulated approximately $1.3 billion in funding so far. The company’s valuation reached $4.9 billion in a mid-2022 funding round.
Despite a remarkably positive year for ShareChat, the markdown is a setback for the company. ShareChat had made significant efforts to reduce expenses and increase revenue, but this markdown shows that there are still challenges to overcome. “During the market downturn, we had to adjust our focus and prioritize more profitable growth,” said Ankush Sachdeva, ShareChat’s co-founder and chief executive, in an interview with Eltrys.
According to Sachdeva, ShareChat has successfully improved user retention and engagement by relying on its content recommendation engine instead of spending money on user acquisition in the past year. As a business owner, the company has made significant investments in AI talent, especially for senior positions within its London-based team. Additionally, as a special bonus, the company has doubled the ESOP grant for each employee in the firm.
Furthermore, Sachdeva mentioned that the company has successfully reduced its most significant expense, which is the cost of delivering content. One of our apps performs a significant amount of computation when fetching content to identify the top 10 pieces. There is an additional delivery cost associated with serving and consuming that. Optimizing this has been instrumental in reducing our expenses,” he said.
The CEO mentioned that ShareChat has successfully decreased its monthly cash burn by 90% in the last two years, all while managing to double its revenue. This impressive achievement has also attracted the attention of major FMCG firms and gaming companies as advertisers. The startup is determined to continue its presence in the short-video market in India, even in the face of tough competition from YouTube and Instagram after the ban on TikTok in 2020, according to the spokesperson.
“Our traffic may not be as high as Instagram and YouTube, but we are proud to be the largest stand-alone app,” Sachdeva stated. ShareChat’s emphasis on live-streaming as a hub for entertainment and fostering connections between creators and users sets it apart from its American competitors. In 2022, the startup made a significant acquisition by purchasing local rival MX TakaTak for a staggering $700 million.
