Social media platform ShareChat, known for its recent cost-cutting measures, is reportedly in advanced discussions to raise approximately $60 million in a funding round from its existing investors, including Google, Lightspeed, and Temasek, sources told Inc42.
The funding is expected to be raised through convertible notes at a discounted valuation of $2.8 billion, a significant decrease from its valuation of about $4.9 billion in March of the previous year.
According to one of the sources, the funding round is slated to conclude by the end of January and may see participation from several other existing investors of ShareChat.
Convertible notes are a form of short-term debt that can be converted into equity in future funding rounds or during an initial public offering (IPO). They provide a way for startups to secure funding without immediately determining their valuation, which is determined when the notes convert into equity.
ShareChat declined to comment on queries regarding the funding round.
This development comes shortly after Inc42 reported that ShareChat had recently laid off approximately 15% of its workforce, or around 200 employees. This was the second round of layoffs for ShareChat in 2023, following an earlier layoff of around 500 employees, or 20% of its workforce, in January.
Sources indicate that the recent restructuring has reduced ShareChat’s monthly burn rate to below INR 40 crore ($4.8 million), while the startup is currently generating a monthly revenue of about INR 65 crore ($7.8 million). Additionally, the sources claim that ShareChat’s contribution margin has turned positive.
ShareChat’s operating revenue increased by 62% to INR 540.21 crore in FY23 from INR 332.69 crore in the previous fiscal year, while its net loss grew by 38% to INR 4,064.3 crore from INR 2,941.5 crore in FY22.
Last year, ShareChat’s parent company Mohalla Tech shut down its fantasy gaming platform Jeet11, resulting in 100 employees losing their jobs. Additionally, two cofounders of ShareChat, Bhanu Pratap Singh and Farid Ahsan, resigned from the company. They went on to found a robotics startup called General Autonomy, which recently raised $3 million in seed funding from India Quotient and Elevation Capital.
Overall, ShareChat has raised over $1 billion in funding and counts Google, X (formerly Twitter), Tiger Global, and Tencent among its backers.
