Social media startup ShareChat’s valuation has fallen to $2 billion from nearly $5 billion following a new funding round, a source familiar with the situation told TechCrunch, marking a steep decline for the nine-year-old Indian startup that boasts over 400 million users in the South Asian market.

The Bengaluru-based startup, which operates a popular social network supporting a dozen Indian languages and a short-form video app, said on Monday that it had raised $49 million in a convertible round. It did not disclose the valuation at which the funds were raised, but strongly denied that its new valuation was below $2 billion, asserting there was “no valuation” attached to the round.

Existing investors, including Lightspeed, Temasek, Alkeon Capital, Moore Strategic Ventures and HarbourVest, contributed to the new round, the startup said. Their debt will convert to equity at a valuation below $2 billion in the next round, according to a source with direct knowledge of the terms who requested anonymity to speak candidly. TechCrunch reported in December that ShareChat was facing a steep valuation cut.

ShareChat also counts Google, X, Snap, Tiger Global and Tencent among its backers. It has raised about $1.3 billion to date. The company was valued at $4.9 billion in a funding round it raised in mid-2022.

The markdown comes despite a remarkably positive year for ShareChat, which had aggressively cut expenses and doubled its revenue. “When the market turned, we had to temper [acquisitions and creator payments] and move towards more profitable growth,” Ankush Sachdeva, ShareChat’s co-founder and chief executive, told TechCrunch in an interview.

ShareChat has not spent money on user acquisition in the past year, Sachdeva said, crediting improvements to the startup’s content recommendation engine for driving user retention and engagement. The company has also invested heavily in AI talent, particularly for senior roles in its London-based team, and has doubled the ESOP grant for each employee in the firm as part of a special bonus grant.

In addition, Sachdeva said the company has been able to pare down its single largest expense — the cost of serving content. “When you fetch content on one of our apps, we do a lot of computation to find the 10 best content. To serve and consume that, there is another delivery cost. Optimizing this has helped us lower our burn,” he said.

ShareChat has reduced its monthly cash burn by 90% over the past two years while doubling revenue, attracting large FMCG firms and gaming companies as advertisers, the CEO said. The startup also remains committed to the short-video market in India, despite strong competition from YouTube and Instagram following the country’s ban on TikTok in 2020, he added.

“In terms of traffic, ours is lower than those of Instagram and YouTube, but we are the largest in terms of a stand-alone app,” said Sachdeva. He believes ShareChat’s focus on live-streaming as a destination for entertainment and creator-user connections will differentiate it from its U.S. rivals. In 2022, the startup acquired local rival MX TakaTak in a deal valued at over $700 million.