The Indian social media startup ShareChat has faced a significant decline in its valuation during its latest funding round, dropping from almost $5 billion to just under $2 billion, according to a source familiar with the situation. This marks a steep decrease for the nine-year-old company, which boasts over 400 million users in the South Asian market.
ShareChat, based in Bengaluru, announced on Monday that it had raised $49 million in a convertible round of funding. Although the startup did not disclose the specific valuation at which the funds were raised, it strongly denied that it was below $2 billion, stating that there was “no valuation” attached to the round.
However, a source with direct knowledge of the terms revealed that existing investors, including Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures, and HarbourVest, have invested in the new round. Their debt will convert to equity at a valuation below $2 billion in the next round, the source disclosed, requesting anonymity to speak candidly. In December of last year, TechCrunch reported that ShareChat was expected to see a significant decline in its valuation.
ShareChat’s team of investors also includes Google, X, Snap, Tiger Global, and Tencent, and the startup has raised a total of $1.75 billion to date. In its most recent funding round in mid-2022, ShareChat was valued at $4.9 billion.
The markdown in valuation comes as a surprise, considering ShareChat’s positive performance over the past year. The startup has aggressively reduced expenses while simultaneously doubling its revenue. Co-founder and CEO Ankush Sachdeva explained in an interview with TechCrunch that when the market turned, they had to adjust their acquisitions and creator payments to focus on more profitable growth.
Sachdeva revealed that ShareChat has not spent any money on acquiring new users in the past year, instead utilizing improvements to the startup’s content recommendation engine to drive user retention and engagement. ShareChat has also invested heavily in AI talent, particularly in London, and recently announced that it has doubled its employee ESOP grant as part of a special bonus initiative.
Additionally, ShareChat has successfully reduced its largest expense, the cost of serving content. According to Sachdeva, their content recommendation systems go through a significant amount of computation to find the top 10 pieces of content, and then there are delivery costs for users to consume that content. However, by optimizing this process, ShareChat has been able to significantly lower its burn rate while simultaneously doubling its revenue.
This improved efficiency has attracted the attention of large FMCG firms and gaming companies, who have become advertisers on the popular platform. Despite stiff competition from American giants like YouTube and Instagram, ShareChat remains dedicated to the short-video market in India, even after TikTok was banned in the country in 2020.
Sachdeva shared that while ShareChat may not have as much traffic as competitors like Instagram and YouTube, they are the largest standalone app for short-form video content. He believes this is due to ShareChat’s unique focus on live streaming as a destination for entertainment and connecting creators with their audience. This was further reinforced by the startup’s acquisition of local rival MX TakaTak in a deal with a valuation over $700 million in 2022.
