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ShareChat is reportedly in the final stages of discussions to secure around $50 million in new funding, which could potentially lower the startup’s valuation to less than $1.5 billion, according to sources familiar with the matter. Existing investors, including Temasek and Tencent, are said to be among those in advanced talks for the new funding round, but the sources requested anonymity as the discussions are private. ShareChat has engaged in discussions with various potential investors this year, but some have hesitated due to the startup’s high valuation expectations compared to its current low revenue, according to one potential investor.
As of now, the ongoing talks value ShareChat below $1.5 billion, a significant decrease from the $4.9 billion valuation it received in the early funding rounds last year. The terms of the discussions may undergo slight changes as they progress, and the round could be finalized by the end of the year. ShareChat, which claims to have over 400 million users (Sensor Tower estimates less than 40 million), has contested the reported valuation figures, stating they are “grossly inaccurate.” Temasek has declined to comment, citing its policy.
The Bangalore-based startup, which operates a social network and is backed by investors such as X, Snap, and Tiger Global, has raised over $1.4 billion to date, according to Tracxn. ShareChat’s unsuccessful foray into the Indian short-video space following the TikTok ban has led to a search for funds and a subsequent markdown in valuation. Despite launching the short-video app Moj in mid-2020 and acquiring MX TakaTak for over $600 million, industry analysts suggest that YouTube and Instagram have filled the TikTok void, drawing creators to their larger platforms.
ShareChat, founded eight years ago, has faced challenges in growing its revenue and cutting expenses after its co-founders left earlier this year. The startup has undertaken various initiatives, including a fantasy sports app and a live audio chat service. However, its revenue remained below $65 million at the end of the financial year in March. In an effort to streamline operations, ShareChat plans to reduce its workforce by 15% to 20%, affecting 200-300 employees in the coming weeks. This marks the third layoff from the startup in a year. (ShareChat confirmed the layoffs after the publication of this story, stating that about 200 jobs were being eliminated.)
The current economic slowdown globally has led many investors to write down the value of their holdings in startups. Prosus recently marked down the valuation of Byju’s to below $3 billion, down from $22 billion in early 2022. Byju’s, having raised over $5 billion in equity and debt over the years, is among the many startups experiencing reduced valuations in the challenging economic environment.
