ShareChat, the Indian social media startup, has experienced a significant decline in its valuation, dropping below $2 billion from almost $5 billion in a recent funding round. This represents a steep decline for the nine-year-old company, which boasts over 400 million users in the South Asian market. While ShareChat did not disclose the valuation at which the funds were raised, it strongly denied having a valuation below $2 billion, stating that there was no specific valuation attached to the round.
Existing investors, including Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures, and HarbourVest, participated in the new funding round. However, their debt will convert to equity at a valuation below $2 billion in the next round, according to insider information. These details were provided by a source who requested anonymity to speak openly about the situation.
ShareChat’s backers also include Google, X, Snap, Tiger Global, and Tencent. The company has raised approximately $1.3 billion to date and was valued at $4.9 billion in a funding round it completed in mid-2022.
The markdown in valuation comes as a surprise given ShareChat’s positive performance over the past year. Despite facing challenges due to market conditions, the company successfully cut expenses and managed to double its revenue. Ankush Sachdeva, ShareChat’s co-founder and CEO, explained that they had to adjust their strategy and prioritize profitable growth when the market conditions changed.
One of the key factors contributing to ShareChat’s success was its focus on improving its content recommendation engine. By enhancing user retention and engagement through personalized content recommendations, the company was able to avoid spending money on user acquisition. Additionally, ShareChat invested heavily in AI talent, particularly for senior roles in its London-based team. These efforts have paid off, enabling the company to reduce its single-largest expense, the cost to serve content.
Sachdeva highlighted the optimization of content delivery as a significant factor in lowering expenses. ShareChat’s computation process to find the best content and the subsequent delivery cost were streamlined, resulting in a significant reduction in burn rate. Over the past two years, the company has reduced its monthly cash burn by 90% while doubling its revenue. This has attracted the attention of large FMCG firms and gaming companies as advertisers.
Despite facing fierce competition from YouTube and Instagram following the ban on TikTok in India in 2020, ShareChat remains committed to the short-video market. Sachdeva believes that the company’s unique focus on live-streaming as a destination for entertainment and creator-user connections will differentiate it from its American rivals. In 2022, ShareChat acquired local rival MX TakaTak in a deal valued at over $700 million, further strengthening its position in the market.
While the recent valuation decline may raise concerns, ShareChat’s ability to adapt to market conditions, optimize its operations, and attract advertisers suggests that it has the potential for future growth. The company’s focus on user engagement and its commitment to the short-video market in India demonstrate its determination to stay competitive in the evolving social media landscape. As ShareChat continues to innovate and differentiate itself, it will be interesting to see how it navigates the challenges ahead and capitalizes on its vast user base in the South Asian market.