Social media startup ShareChat’s valuation has fallen below $2 billion, down from nearly $5 billion in a new funding round, a source familiar with the matter told TechCrunch, marking a sharp decline for the nine-year-old Indian startup that has over 400 million users in the South Asian market.
The Bengaluru-based startup, which operates a popular social network supporting a dozen Indian languages as well as a short-form video app, announced on Monday that it had raised $49 million in a convertible funding round. She did not disclose the valuation at which the funds were raised, but strongly denied that its new valuation was less than $2 billion, saying there was “no valuation” attached to the round.
Existing investors including Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures and HarbourVest invested in the new round, the startup said. Their 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 decline.
ShareChat also counts Google, X, Snap, Tiger Global and Tencent among its backers. To date, approximately $1.75 billion has been raised. ShareChat was valued at $4.9 billion in a funding round raised in mid-2022.
This reduction comes despite ShareChat having had a remarkably positive year, aggressively cutting expenses while managing to double its revenue. “When the market turned, we had to moderate (creator acquisitions and payments) and move towards more profitable growth,” Ankush Sachdeva, co-founder and chief executive of ShareChat, told TechCrunch in an interview.
ShareChat hasn’t spent money acquiring users 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 for leadership roles within its London-based team. ShareChat also revealed that it has doubled the ESOP subsidy for every employee of the company as part of a special bonus.
It was also able to reduce its biggest expense, the cost of delivering content, he said. “When you pull content from one of our apps, we do a lot of calculations to find the top 10 content. To serve and consume this, there is another delivery cost. Optimizing this has helped us reduce our consumption,” he said.
ShareChat has reduced its monthly cash burn by 90% over the past two years while doubling its revenue, attracting large FMCG companies 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 TikTok’s ban in the country in 2020.
“In terms of traffic, ours is less than Instagram and YouTube, but we are the largest in terms of a standalone app,” Sachdeva said. He believes ShareChat’s unique focus on live streaming as an entertainment destination and creator-user connections will differentiate it from its U.S. competitors. The startup acquired local rival MX TakaTak in a deal valued at over $700 million in 2022.
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