The Indian startup ShareChat valuation drops below $2 billion in new funding. The X, Google, and Snap-backed Indian startup claimed to have cut its burn by more than 90% while increasing its revenue by double.
After a fresh funding round, the social media startup ShareChat’s valuation plummeted to less than $2 billion from almost $5 billion, a source who is familiar with the situation informed TechCrunch. This represents a sharp decline for the nine-year-old Indian startup, which has over 400 million users in the South Asian market.
The startup revealed on Monday that it had secured $49 million in a convertible round. It runs a popular social network that supports twelve Indian languages in addition to a short-form video app. Although it refuted claims that its new valuation was less than $2 billion and said that “no valuation” was associated with the transaction, it did not reveal the valuation at which the funds were raised.
According to the Bengaluru-based startup, the fresh round was funded by existing investors Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures, and HarbourVest. In the upcoming round, their debt will be converted to equity at a valuation of less than $2 billion, per a source with firsthand knowledge of the details. For the sake of candor, the source asked to remain anonymous. ShareChat faced a significant valuation reduction, according to a December TechCrunch story.
Among its supporters are Google, X, Snap, Tiger Global, and Tencent in addition to others. Thus far, it has raised roughly $1.3 billion. In a funding round that it held in the middle of 2022, ShareChat raised $4.9 billion in total.
The discount is in place even though ShareChat had an exceptionally successful year, significantly reducing costs while tripling its income. “We had to temper [acquisitions and creator payments] and move towards more profitable growth when the market turned,” co-founder and CEO of ShareChat Ankush Sachdeva said in an interview with TechCrunch.
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Sachdeva attributes the company’s increased user retention and engagement to enhancements in its content recommendation engine, saying that ShareChat had not invested in user acquisition in the previous year. Additionally, the business has made significant investments in AI talent, especially for senior positions in its London-based team. As part of a special bonus grant, ShareChat also revealed that it has increased the ESOP award for every employee in the company.
According to him, it has also been able to reduce the cost of serving content, which was formerly its biggest outlay. “We perform extensive processing to identify the top 10 pieces of information when you retrieve it from one of our apps. There is an additional delivery fee for serving and consuming that. We have reduced our burn by optimizing this, he said.
Over the previous two years, ShareChat has doubled revenue and cut its monthly cash burn by 90%, drawing in big FMCG and gaming brands as advertisers.
In addition, the business is still dedicated to the Indian short-video industry, even with the country’s 2020 TikTok ban and fierce competition from YouTube and Instagram.
“We have less traffic than YouTube and Instagram combined, but we are the biggest standalone app,” Sachdeva added. He thinks ShareChat will stand out from American competitors due to its distinct emphasis on live-streaming as a hub for entertainment and interactions between creators and users. In 2022, the firm paid over $700 million to purchase local rival MX TakaTak.