Dud Acquisitions, User Attrition & Founder Exits: How Google-Backed ShareChat Is Faltering

Dud Acquisitions, User Attrition & Founder Exits: How Google-Backed ShareChat Is Faltering


ShareChat spent close to $1 Bn in acquisitions, and raised more than $900 Mn during the peak of startup funding in 2021

With its eyes set on scaling up, the company splurged on salaries of up to INR 60.5 Lakh per year, which have left a major dent on its financials

As the ShareChat promise comes undone, verticals such as gaming, live commerce and social commerce were shuttered. Will the cuts go deeper?

The maxim goes there’s no such thing as a free lunch. But late last year when ShareChat announced its decision to revoke daily issuance of Zomato coupons worth INR 250 to its roughly 2,800 employees, the response was a three-ring meme circus on the company’s Slack channels. 

The memes were one way for employees to speak out on the company’s decision to suddenly end the daily meal perk. However, perhaps no one anticipated the tide of misfortune lurking ahead. ShareChat’s decision to keep its workforce on a diet (pun intended) was just the beginning.   

“It reminded us of what Elon Musk did when he acquired Twitter. He stopped the free lunches at the Twitter headquarters,” a former ShareChat employee told Inc42.

Guffaws soon turned into frowns, triggering an era of palpitations. ShareChat put several employees on performance improvement plans (PIPs), which eventually resulted in the reduction of the workforce by 10%. This included layoffs at Jeet11, which was subsequently shut down in December 2022.

But that was not the end of the downsizing. The 10% layoffs in December were followed by another 20% of the workforce being asked to leave in January, as per sources close to the development. 

ShareChat denies that the PIPs led to large-scale layoffs. “Last year, we introduced a company-wide ‘raise the bar’ programme. This is common for all large organisations as a mechanism to improve productivity within the company. This programme resulted in less than 2% involuntary attrition from our total employee base. Claims of a reduction of 10% in the workforce are absolutely incorrect,” a company spokesperson said.

Despite this, there are questions about the social media unicorn’s splurging on employee benefits and other perks, which led to a series of cutbacks that have left the company reeling. But the problems run deeper than just meal coupons, layoffs or the PIP issue.

To make matters worse, many of ShareChat’s acquisitions have not exactly fit in well or added value to the business as expected. With its user base and engagement also shrinking, ShareChat’s story is fast unravelling. But how did the company lose its way so badly?

The Exodus At The Top

The fact that the layoffs happened amid a string of top-level exits at ShareChat in November and December 2022 only made things worse for the startup. The high-profile exits included the chief commercial officer Ajit Varghese, head of commerce Nishad Shah, and other key roles such as senior directors of AI, ML, monetisation and live commerce, and content head at Moj. 

Despite reassurances from cofounder and CEO Ankush Sachdeva and CFO Manohar Charan about the company’s cash runway, things did not seem to be going well.

And then two of the company’s cofounders – chief technology officer Bhanu Pratap Singh and chief operating officer Farid Ahsan – also moved on from their respective roles, bringing the limelight on ShareChat’s work culture, operations, and financial state.

A former executive at the company told us that Singh and Ahsan had already stepped away from ops even before the announcement of his exit. “Bhanu stopped involving himself in day-to-day operations. In fact, we would hardly see him in meetings. Farid was not as active as he was earlier. It was more like Ankush and Manohar (the current CFO) were running the entire show,” a former ShareChat executive said.

The ShareChat Fairy Tale 

With the emergence of the work from home model during the peak pandemic time, the Indian startup ecosystem witnessed aggressive hiring trends. As VCs pumped in dollars, many new-age tech firms went ballistic on attracting top talent, offering fat pay cheques and big bonuses for several roles. 

Between 2020 and 2021, ShareChat hired more than 50% of its workforce and offered competitive salaries to many across various job roles, sources told us. 

While the company declined to share its hiring numbers from that time, a former employee at ShareChat said, along with an array of employee benefits, the bonuses offered by the company were unparalleled. 

ShareChat also hired data scientists from the UK, Russia and the US to build an artificial intelligence lab in the US, sources said. Some top executives who were hired last year include head of FMCG vertical Prasanna Raman (earlier with Snap); head of agency business Rabe Iyer (earlier with Wavemaker & Reliance), and chief product officer Amit Zunjarwad (the head of engineering at Flipkart earlier).

ShareChat's key expenses in FY22

As per HR platform Levels.FYI, ShareChat offered salaries to the tune of INR 39.7 Lakh a year to software development engineers, INR 36.8 Lakh a year to product managers and INR 60.5 Lakh per annum to data scientists. 

As the company expanded its workforce pool, it tied-up with coworking firm WeWork to provide workspaces to its employees outside Delhi, Mumbai, and Gurugram— the cities where the company has its offices. 

Former employees we spoke to said that the measures were definitely progressive, but not sustainable. For instance, since most of these new engineers were hired for remote roles, the company arranged for a work retreat or offsite in Udaipur.

There were other employee engagement measures as well. In March 2022, the startup said it would give special leave allowances and packages for childcare, fertility, and adoption to its women employees. ShareChat also said that it would pay INR 7,000 a month as nanny expenses to women employees that have children under the age of six. 

“At the time of laying off, the company let us keep the laptops and smartphones that it had issued. Plus, the range of salaries that they offered was unmatchable. Now that I am hunting for a job, no company is offering me what ShareChat once did,” a former content strategist said.

The Pandemic Shot In The Arm 

ShareChat’s growth story picked up momentum during the peak pandemic year of 2021, with the highest-ever funding ($913 Mn) raised by a startup in that year. Soon, in 2022, the company joined hands with investors such as Google, Temasek, and Times Internet to raise another $255 Mn at a 5x valuation jump to $5 Bn.

The pitch that ShareChat gave investors was simple: India is a daily active user (DAU) factory, and if the company onboarded millions of users, monetisation will be the next logical step. 

The user base claims were somewhat justified. ShareChat was sitting on a huge user base of nearly 400 Mn in 2022, including the users on short video apps Moj and MX TakaTak, which the company acquired from Times Internet.

Despite these millions of users, ShareChat’s ambition of being India’s answer to Meta or Twitter did not really work out. This unicorn aimed to target the segments beyond metros i.e in Tier 2 and 3 towns and beyond with regional language content, which has been something of a challenge for Facebook and Twitter.

Experts argue that the targets in terms of revenue and user monetisation weren’t realistic enough, as they were influenced by the boost witnessed during the peak of the pandemic.

“The pandemic-induced lockdowns made people spend more time online. But as the pandemic waned, social media platforms started experiencing degrowth in engagement and revenue,” a Delhi-based social media content strategist said.

A Timeline of ShareChat's Woes

Data sourced for engagement and downloads highlight this slowdown. In January 2021, ShareChat had a daily active user (DAU) base of 8.2 Mn, which fell to 5.9 Mn in January 2022 and then to 5.3 Mn in January 2023, according to app intelligence platform Apptopia. Further data for average monthly downloads shows a 50%-plus decline between January 2021 (6.8 Mn) and January 2023 (3.1 Mn). 

But besides splurging on employees and acquiring users, ShareChat also went the inorganic route for growth, and this too has complicated the situation for the unicorn. 

When Acquisitions Cost You Dearly

While reports indicate that ShareChat acquired six companies to bolster its content to commerce businesses in the past two years, there are some gaps in this narrative too. 

The acquisitions include short video app Clip; fashion peer-to-peer marketplace Elanic; news and information platform Circle Internet; meme sharing app Memer; artists and brands distribution platform HPF Films, and short video platform MX TakaTak

Except for MX TakaTak, ShareChat has not disclosed the financial details of the acquisitions. As per sources, ShareChat spent close to $1 Bn for these acquisitions, with the MX TakaTak buyout being a cash-and-stock deal worth $700 Mn.

When asked about the acquisition costs, ShareChat declined to comment on the financial details of the deals, and also completely denied acquiring HPF Films and Circle Internet. 

The spokesperson insisted that the company has only made four acquisitions — Clip, Elanic, Memer and MX TakaTak. 

ShareChat's Acquisitions Over The Years

This was contrary to announcements of the acquisitions of HPF in September 2020 and Circle Internet in August 2020. So the question is why ShareChat was distancing itself from two acquisitions which are clearly in the public record.

Regardless of the official stance, there are indications that these acquisitions happened. For instance, HPF Films’ cofounder and COO Navin Lalwani’s LinkedIn profile claims the company was ‘Acquired by ShareChat’.  

The story behind the contested acquisition of Circle Internet is perhaps even more interesting.

At the time of the announcement in August 2020, Circle Internet’s CEO and cofounder Shashank Shekhar was quoted as saying, “I am doubly excited to start my second innings at ShareChat.”

According to Shekhar’s Linkedin profile, he worked at ShareChat as the head of content from December 2016 to May 2018, and in June 2018 launched Circle Internet. Currently, he claims to be the cofounder and CEO of Circle Internet, and a senior director of content strategy & operations at ShareChat.

Even if we go by the company’s latest statement that these two acquisitions never happened, there are many red flags about the merit of these acquisitions and integration into the core ShareChat platform. 

No Country For Cashburn

The idea was to integrate the features of the acquired platform into the Sharechat app to enhance its social commerce and short video play, but this did not work out as smoothly as expected. “The employees from these companies were absorbed by ShareChat. However, some of the experiments failed, which resulted in an added cost burden for the company,” a former employee said.

For instance, introducing features like in-app rewards or coins failed because of the transaction size. “Features like live chat rooms where creators and influencers would receive cash rewards from other users were unique. But the transaction size was too low to keep creators glued to the platform,” the source added.

As the experiments failed, ShareChat shuttered its fantasy gaming app Jeet11 and the live commerce vertical. Earlier, we had exclusively reported that the Google-backed Sharechat shut down its social commerce vertical in December 2022, but the company described this as a temporary scaledown.

Other sources say that the issues related to monetising content on Moj and MX TakaTak still persist, especially amongst audiences in northern India. This is in line with the overall decline in engagement and downloads for the short video segment.

“Moj has got them reasonable traction in some parts of southern India. Much will depend on how the MX TakaTak acquisition will play out in the coming months. They have come up with experimentations like Moj Plus and Moj Lite+ to create new monetisation avenues,” a source with knowledge of the matter said.

Inc42 has learnt that after downsizing the workforce, ShareChat also cut off ties with some marketing agencies to save costs. “In a way, the MX TakaTak acquisition was aimed to conquer the influencer universe and was expected to help in user growth and monetisation,” a source said.  

But monetisation remains an elusive goal for Google-backed ShareChat and other Indian social media apps. ShareChat and Moj parent Mohalla Tech Pvt Ltd reported a 4.3X jump in revenue to INR 419.2 Cr  in FY22, but its loss surged 2.1x YoY to INR 1,183 Cr on the back of business development and employee expenses.

While responding to Inc42’s questions on cost-cutting measures, ShareChat said, “Every well-run company operates that way. Have we become more frugal in our spending? Yes! We are indexing more on growth through organic means and retention improvements.”

Of course, this is a standard response by many companies in the current downturn. There’s little doubt that ShareChat is not the only company that has seen rough times since 2022. 

But ShareChat’s track record of haphazard acquisitions, the exodus of leaders and founders, splurging on employee benefits and streak of failed product experimentation leave the unicorn exposed to the brutal elements of the startup winter. 

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