ShareChat is in the final stages of securing new funding in the amount of $50 million, according to sources familiar with the matter. This new funding round would lower the valuation of the startup to below $1.5 billion. According to these sources, existing backers such as Temasek and Tencent are among the investors in advanced talks to participate in the round.
However, due to ShareChat’s high valuation expectations relative to their current low revenue, many potential new investors have hesitated to participate in the discussions, as disclosed by one of these investors who engaged with the startup.
The terms of the ongoing talks currently value ShareChat at less than $1.5 billion, a significant drop from its previous valuation of $4.9 billion when it raised funding in early 2020. The finalization of this round could come as early as the end of this year. ShareChat has not yet responded to requests for comment as of Wednesday morning. Temasek, on the other hand, has declined to comment, citing its policy.
ShareChat, based in Bengaluru and operating a social network, boasts backers such as X, Snap, and Tiger Global. To date, the startup has raised over $1.4 billion, according to venture intelligence platform Tracxn.
However, ShareChat’s unsuccessful venture into the Indian short-video space following the ban of TikTok has now led to a search for new funds as well as a markdown in its valuation. TechCrunch reported exclusively earlier this year that X had explored acquiring ShareChat in a $2 billion deal.
In a bid to compete with the popularity of TikTok, ShareChat launched its own short-video app called Moj in mid-2020. It also acquired MX TakaTak, a video app owned by Times Internet, for over $600 million. However, experts in the industry have noted that YouTube and Instagram have filled the void left by TikTok as creators have migrated to these larger platforms.
Founded eight years ago, ShareChat has seen the departure of its two co-founders earlier this year who have since launched a new startup of their own. In an effort to increase revenue and reduce expenses, ShareChat has attempted various initiatives including a fantasy sports app and a live audio chat service. However, as of the end of the financial year in March, its revenue remained under $65 million. It is said to be planning another workforce reduction of 15% to 20% in the coming weeks, according to a source familiar with the matter.
Amid the prolonged economic slowdown, numerous investors have marked down the value of their holdings in startups globally. This has also resulted in decreased valuations for many public tech firms. Recently, Prosus marked down the valuation of one of its investments, Byju’s, to below $3 billion, down from its previous valuation of $22 billion in early 2020. Byju’s has raised over $5 billion in equity and debt over the years.
