Google-backed homegrown social media firm Sharechat has closed a $49 million debt financing through convertible debentures from existing investors-Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures and HarbourVest, amongst others.

The company’s valuation has fallen by over 60 per cent to below $2 billion from its peak of $5 billion, said sources.

This capital raise will help the company invest further behind its ad targeting technology as well as continue the growth of consumer transactions business on ShareChat Live and Moj Live.

This is one of the steepest valuation cuts for a start-up having raised around $1.3 billion billion so far. Byju’s, Udaan and Pharmeasy are also among the large start-ups that have seen steep valuation cuts in recent months.

The ShareChat app is already operationally profitable and the short video app Moj is expected to achieve operational profitability over the next few months, said the company in its statement.

“We are happy to announce the closing of our latest funding round by our existing investors. Their continued support in a challenging financial environment is a resounding vote of confidence for the path we have taken over the past years to move rapidly towards profitable growth. The new funds will be utilised to bolster our robust monetisation plans and propel us on our path to break-even and beyond,” said Ankush Sachdeva, CEO and Cofounder, ShareChat and Moj.

ESOP grant

As the company looks to turn profitable, it announced an organisation wide ESOP bonus program that will double the ESOP ownership for all of its current employees. This move is aimed at retaining its top talent and rewarding them for taking the company to a financially healthier state.

Talking about the expanded ESOPs, he further added, “Our employees were the single most important force powering 2x revenue growth and 90 per cent reduction in our monthly losses over the past two years. We wanted to recognise their efforts and incentivise our teams to continue this momentum and push the company to profitability in the next 4-5 quarters and then to IPO. We are excited to announce a special bonus grant that will double the total ESOP grant for every employee. We are setting aside an ESOP pool equal to 3.5 per cent of the cap table to be disbursed as bonus grants.”

Mohalla Tech-which houses Sharechat and short-video app Moj–has been cutting operating costs over the past one year in a bid to turn profitable. The company has undertaken multiple layoffs rounds

ShareChat (Mohalla Tech) runs short video platform, Moj besides the ShareChat app, which together cater to over 325 million users. In FY23 Sharechat clocked a 62 per cent rise in its revenue at ₹540 crore but its losses grew 38 per cent to ₹4,064 crore.