ShareChat to raise $55-65 million via convertible notes at $2.7 billion valuation

Earlier this week, the company fired 200 employees, around 15 percent of its workforce, in the second such move this year

Social media unicorn ShareChat is set to raise $55-65 million via convertible notes at a discounted valuation of around $2.7 billion from existing investors like Temasek, Tiger Global, Google, Lightspeed Ventures, and others, according to sources in the know.

The company had been valued at almost $5 billion in its last funding round, which means that its valuation has fallen by half amid the funding winter. To be sure, its global peers in the social media space such as X (formerly Twitter) and Snap have seen similar or worse drops in valuation between the peak of the pandemic era and now.

“ShareChat’s funding round is going to close either in January or early February. It is happening at a time when the company has been able to show increasing profitability and revenue growth,” said a person close to the developments.

“The company has been registering revenues of more than Rs 65 crore every month for the last 4 months. While ShareChat turned contribution margin (CM) positive in September, its short video arm Moj turned CM 1 positive in October,” he added.

Sharechat declined to comment on the story.

Earlier this week, the company fired 200 employees, around 15 percent of its workforce, in the second such move this year, to cut costs and achieve profitability within the next four-six quarters.

“ShareChat today undertook a strategic restructuring as part of its annual planning for the year 2024. The decision reflects the company's commitment to streamlining its cost base and achieving profitability within the next four-six quarters,” the company said on December 20.

“As a result, the organisation has moved to a flatter org structure and prioritized product initiatives that resulted in a reduction in team sizes by roughly 15 percent," it added.

The move came after the company laid off around 600 employees in a similar cost-cutting move earlier this year, as co-founders Bhanu Pratap Singh and Farid Ahsan stepped down.

The duo recently raised $3 million in seed funding from venture capital firms India Quotient, Elevation Capital and a few high-profile angel investors for their robotics startup General Autonomy.

Backed by investors such as X (formerly Twitter), Google, Lightspeed, and Temasek, ShareChat’s revenue increase by 59 percent to Rs 553 crore in FY23 from the previous year, the company's annual financial report, sourced from Tofler, shows.

But the social media firm’s net losses shot up 72 percent to Rs 5,144 crore in FY23 on rising server rents, financing costs, foreign exchange losses, etc.

According to a company source, the headline loss number for FY23 is inflated because of multiple notional cost entries and one-time expenses such as amortisation of goodwill from acquisitions (amounting to Rs 1,903 crore), forex losses on account of restatement of USD denominated debentures and accrual of interest on debentures.