ShareChat is in the final stages of deliberations to secure about $50 million in new financing that reduces the startup’s valuation to less than $1.5 billion, according to two sources familiar with the matter.
Existing backers, including Temasek and Tencent, are among investors who have reached advanced stages of talks to invest in the new round, said the sources, who requested anonymity because the matter is private. ShareChat has been in discussions with several potential new investors this year, but many of them turned down the opportunity due to ShareChat’s high valuation expectations compared to their currently low revenues, according to one of the potential investors the startup approached.
The terms of the talks, which are still ongoing so may change slightly, currently value ShareChat at less than $1.5 billion, a sharp decline from the $4.9 billion valuation at which ShareChat raised funding early last year, the sources said.
The tour could be completed as early as the end of the year. Temasek declined to comment, citing its policy. ShareChat, which claims to have more than 350 million users but fewer than 40 million, according to Sensor Tower and Data.ai, said the valuation numbers were “wildly inaccurate.”
The loss-making Bengaluru-based startup — which operates a social network and counts X, Snap and Tiger Global among its backers — has raised more than $1.4 billion so far, according to investment intelligence platform Tracxn.
ShareChat’s failed bet on the Indian short video space amid the TikTok ban has left it scrambling for cash and prompted a price cut. (In late 2020 and early 2021, X explored buying ShareChat in a $2 billion deal, TechCrunch previously exclusively reported.)
ShareChat, which launched short video app Moj in mid-2020, doubled down on the category by acquiring MX TakaTak, a video app in the Times Internet portfolio, for more than $600 million; However, industry analysts say YouTube and Instagram have filled TikTok’s void as creators migrate to those much larger platforms.
Eight-year-old ShareChat, whose founders left earlier this year to launch a new startup, is scrambling to find ways to increase its revenue and cut expenses. It has tried a series of initiatives, including a fantasy sports app and a live voice chat service. But at the end of the fiscal year ending in March, its revenues remained lower than that 65 million dollars. It plans to cut its workforce by another 15% to 20% in the coming weeks, according to another person familiar with the matter.
Many investors are reducing the value of their holdings in startups globally amid a prolonged slowdown in the economy that has also dragged down the valuations of almost every public technology company. Prosus recently cut Byju’s valuation to less than $3 billion, down from $22 billion in early 2022. Byju’s has raised more than $5 billion from equity and through debt over the years.