The internet giant is currently conducting a due diligence exercise after having signed a term sheet or non binding proposal with ShareChat, said the people cited above who also confirmed the appointment of bankers to oversee the negotiations.
“The founders ( of ShareChat) may retain a small stake post the deal”, said one source, adding that all the existing investors in the five-year old startup will exit the company, if the sale negotiations with Google fructify.
Earlier in September, ShareChat
raised $40 million from a slew of investors taking its total funds raised to $264 million. People aware of the details told ET that the startup was last valued at about $650 million.
“More funds will be required if the company expands globally taking the platform to countries in the Middle East,” the source said.
“It is a good time to sell since this is a money intensive business. There is a lot of capital required to get music licenses, influencers etc. Moreover, it is a very competitive market to be in with the launch of so many players,” the person added.
ShareChat declined comment on the developments, while a representative for Google said, “we do not comment on rumours or speculation.”
Earlier this year, Alphabet-owned Google
earmarked $10 billion for investments in India and began by
putting in $4.5 billion investment in Reliance Jio Platforms for a 7.73% stake. The deal was
recently approved by India’s competition watchdog the Competition Commission of India (CCI)
For the American search giant, a successful buyout of ShareChat will provide an entry into the Indian social media space, especially the short-video format that has recorded phenomenal growth after China’s ByteDance-owned Tiktok galvanised the market triggering a spate of clones.
ShareChat, founded by IIT Kanpur graduate Ankush Sachdeva along with Farid Ahsan and Bhanu Pratap Singh has gained enormously in the six months since the ban on TikTok by the Indian government. Its monthly active users has now catapulted to 160 million and it offers content in some 15 Indian languages. While Moj, the short video format that it launched in July has garnered about 80 million users according to industry estimates.
Following the ban on Tiktok, there has been a spate of launches in the short video format space. This includes apps such as MX TakaTak by Times Internet’s MX Player and Josh by DailyHunt. Facebook brought in Reels, while Google introduced Shorts making this a hyper-competitive segment.
ET had reported in August that ShareChat is looking to
raise fresh funding of $150-200 million and is in discussions with investors and technology companies including Google and Microsoft along with existing investors.
Subsequently, ShareChat raised a pre-Series E round of $40 million from investors such as Pawan Munjal, chairman of Hero MotoCorp, DCM Shriram Promoters Family Office, SAIF Partners, Twitter, Lightspeed Ventures and India Quotient. The funding was said to be earmarked to drive growth for Moj, the newly launched short video platform.
Twitter had previously
led ShareChat’s Series D funding round with additional backing by SAIF Partners, Lightspeed Ventures and India Quotient.
Google has earlier said that it will invest in India through a mix of investments and partnerships over the next five to seven years as it aims to consolidate its position in the country, which is emerging as the largest Internet economy in the world with close to 700 million Internet users.