ShareChat To Raise $60 Mn Via Convertible Notes From Google, Lightspeed At $2.8 Bn Valuation

Social media platform ShareChat, which has been on a cost-cutting spree, is in advanced stages of discussion to raise around $60 Mn in a funding round from its existing investors, including Google, Lightspeed, and Temasek, sources told Inc42. 

The funds will be raised via convertible notes at a discounted valuation of $2.8 Bn, people aware of the development said. 

The startup was last valued at about $4.9 Bn in March last year. 

“The funding round will close by the end of January, and can also see participation from many other existing investors of ShareChat,” one of the sources said.

A convertible note is a form of short-term debt that converts into equity in a future funding round or during an initial public offering (IPO). Convertible notes offer a way to secure funding without immediately determining a startup’s valuation. Instead, valuation is determined when the note converts into equity. Amid the ongoing funding winter, a number of new-age tech startups, including Udaan and Dunzo, have resorted to raising funds via convertible notes.

ShareChat declined to comment on Inc42 queries on the development.

The latest development comes a day after Inc42 exclusively reported that ShareChat laid off 15% of its workforce, or about 200 employees. It was the second retrenchment exercise undertaken by ShareChat in 2023. Earlier in January, it laid off around 500 employees, or 20% of its workforce.

Sources said that the latest restructuring exercise has brought down ShareChat’s burn rate to below INR 40 Cr ($4.8 Mn) per month. The startup is currently clocking a monthly revenue of about INR 65 Cr ($7.8 Mn). 

The sources also claimed that ShareChat’s contribution margin has now turned positive.

It is pertinent to note that ShareChat’s operating revenue rose 62% to INR 540.21 Cr in FY23 from INR 332.69 Cr in the previous fiscal year, while net loss grew 38% to INR 4,064.3 Cr from INR 2,941.5 Cr in FY22.

Late last year, ShareChat’s parent Mohalla Tech shut its fantasy gaming platform Jeet11, which resulted in 100 employees losing their jobs.

Besides the layoffs, two cofounders of the startup – Bhanu Pratap Singh and Farid Ahsan – also resigned. Following this, they founded a robotics startup General Autonomy and raised $3 Mn seed funding for it last month from venture capital firms India Quotient and Elevation Capital.

Overall, ShareChat has raised a funding of over $1 Bn till date and counts the likes of Google, X (erstwhile Twitter), Tiger Global, and Tencent among its backers.