As investors, wary of high valuations in an uncertain stock market, continue pushing tech companies to cut costs, social media platform ShareChat today became the latest to downsize in anticipation of an impending recession. The company, backed by tech giants like Google and Temasek, announced it will let go of 20 percent of its staff as it needs to prepare the company to sustain “several external macro factors that impact the cost and availability of capital”.
Owned by Bangalore based Mohalla Tech Pvt Ltd., ShareChat and its short video app Moj is expected to lay-off around 500 people. ShareChat is valued at $5 billion, and has more than 2,200 employees.
“We’ve had to take some of the most difficult and painful decisions in our history as a company and had to let go of around 20% of our incredibly talented employees who have been with us in this start-up journey,” a company spokesperson said today, adding that “as capital becomes expensive, companies need to prioritise their bets and invest in the highest-impact projects only”.
This big decision comes in the backdrop of Mohalla Tech shutting down its online fantasy gaming platform Jeet11 in December 2022, following which nearly 100 employees were laid off.
The company said it has aggressively optimised costs across the board over the last six months, and ramped up monetisation efforts.
“The decision to reduce employee costs was taken after much deliberation and in light of the growing market consensus that investment sentiments will remain very cautious throughout this year,” the spokesperson said.
It said it’s doubling down on advertising and live-streaming revenues, and aims to sail through “uncertain economic conditions” over the next two years and come out stronger.
The company’s severance package will include the total salary for the notice period, two weeks’ pay for every year served at the company, full variable pay till December 2022, and health insurance cover to remain active until June 2023.
Additionally, employees will be allowed to retain work assets like their laptops, Employee Stock Option Plans (ESOPs) will continue to vest as scheduled till April 30, 2023 — which employees will retain, and unused leave balance of up to 45 days will encashed as per current salary.
As per the regulatory filings last December, Mohalla Tech Private Limited had reported a 4.3x jump in its total revenue to Rs 419.2 crore during the financial year 2021-2022, from Rs 80.4 crore in financial year 2023.
ShareChat app contributes majorly to the revenue of Mohalla Tech through advertisements, which increased 30% year-on-year in FY22. Mohalla Tech’s total expenses shot up nearly 119% to Rs 3,407.5 crore from Rs 1,557.5 crore in financial year 2021. This was all due to the increase in marketing, employee benefits, and IT expenses.
The losses of Mohalla Tech widened further from Rs 2498.6 crore to Rs 2,988.6 crore due to “non-operating expenses”.