ShareChat, a Bengaluru-based startup, is currently in the final stages of negotiations to secure approximately $50 million in new funding. However, the new investment is expected to significantly reduce the startup’s valuation to below $1.5 billion, marking a substantial drop from its previous valuation of $4.9 billion.
Key Takeaway
ShareChat is undergoing a significant valuation cut in its latest funding round, reflecting the challenges it faces in scaling revenue and adapting to shifts in the Indian short-video space.
Investor Backing and Valuation Concerns
Existing backers such as Temasek and Tencent are reportedly in advanced talks to participate in the new funding round. However, several potential new investors have expressed hesitance due to ShareChat’s high valuation expectations in comparison to its current revenue, according to sources familiar with the matter.
Struggles in the Indian Short-Video Space
ShareChat’s foray into the Indian short-video space faced challenges following the ban on TikTok, leading to a search for additional funds and contributing to the markdown in its valuation. Despite launching the short-video app Moj in mid-2020 and acquiring MX TakaTak, industry analysts note that larger platforms like YouTube and Instagram have filled the void left by TikTok, attracting creators to their platforms.
Revenue Growth and Cost-Cutting Efforts
The eight-year-old startup, which has raised over $1.4 billion to date, has been exploring various avenues to boost its revenue and reduce expenses. However, its revenue at the end of the financial year remained below $65 million. ShareChat also plans to further reduce its workforce by 15% to 20% in the coming weeks as part of its cost-cutting measures.
Industry-wide Valuation Adjustments
ShareChat’s valuation cut is reflective of a broader trend in the startup ecosystem, with numerous investors globally reassessing the worth of their holdings. This trend is attributed to the prolonged economic slowdown, which has also impacted the valuations of public tech firms. For instance, Prosus recently marked down the valuation of Byju’s to below $3 billion from $22 billion earlier this year.
