Canvas $42bn, Justified?

Got it — I’ll prepare a 1,000-word Breaking News article on Canva’s $42bn valuation share sale, keeping to the GFM Review house style (plain English, short paragraphs, no m-dashes, UK spelling).

Canva, the Australian design software developer that has become one of the country’s most successful technology groups, has lifted its valuation to $42bn after a secondary share sale, renewing speculation that it will soon follow rival Figma to the public markets.

The Sydney-based company said on Wednesday that demand for shares came from existing investors and new backers including JPMorgan Asset Management. The deal represents a substantial step-up from October last year, when a similar share sale valued Canva at $32bn.

Cliff Obrecht, co-founder and chief operating officer, described the response as a “huge vote of confidence in our momentum and the scale of what still lies ahead”.

One of Australia’s Tech Champions

Founded in 2013 by Obrecht, Melanie Perkins and Cameron Adams, Canva has built its reputation on a web-based platform that allows anyone to produce designs, presentations and social media content without specialist training. The software is widely used in schools and universities as well as by large companies seeking fast and inexpensive marketing material.

Canva is now one of Australia’s best-known start-ups, mentioned in the same breath as Atlassian, the enterprise software group that listed on Nasdaq in 2015 and has a market capitalisation of more than $50bn. Both companies are backed by the country’s most prominent venture capital firms, including Blackbird, Square Peg and Airtree.

The company reported in June that it had 240m active users a month and annualised revenue of $3.3bn, a figure calculated by extrapolating recent monthly sales. The numbers highlight the speed with which Canva has grown from an education-focused tool into a global platform competing directly with Adobe and Figma.

Figma’s Listing Sets the Tone

The timing of the latest valuation has drawn comparisons with Figma, Canva’s US rival, which floated last month in New York. Figma priced its shares at $33, but investor enthusiasm quickly doubled the price to more than $69, giving it a market value of $34bn.

Figma reported $749m in revenue last year and had 13m active users a month in the first quarter, according to its IPO prospectus. By comparison Canva’s user base is more than 18 times larger and its projected revenue more than four times higher. That contrast has not gone unnoticed among investors who believe Canva’s eventual listing could command a valuation well above its latest private mark.

The company has long been expected to float in the US rather than Sydney, following Atlassian’s path to the Nasdaq. Although Canva has made no formal commitment, the recruitment of Kelly Steckelberg as chief financial officer late last year was widely seen as a preparatory step. Steckelberg previously held the same role at Zoom Video Communications when it went public in 2019.

Recovery from Tech Rout

Canva’s path has not been entirely smooth. In 2021, at the height of the technology bull market, the company was valued at $40bn in a round led by T Rowe Price alongside Sequoia Capital Global Equities and Franklin Templeton. That figure was cut sharply in 2022 when public markets slumped and several shareholders marked down their stakes to about $25bn.

The new valuation suggests confidence has returned, in part due to the broader rebound in technology stocks this year. It also reflects Canva’s resilience compared with smaller software firms whose growth slowed as pandemic-era demand subsided.

Investors note that Canva’s model, built around low-cost subscriptions and an expanding set of features, has kept churn low while allowing the company to reach a broad spectrum of users, from school students to Fortune 500 companies.

Expanding into AI

Like many of its peers, Canva is betting on artificial intelligence to drive its next phase of growth. Last year it acquired Leonardo AI, an Australian start-up that generates images from text prompts. The acquisition underlines Canva’s ambition to remain competitive against Adobe, which has integrated AI tools into its Creative Cloud suite, and against Figma, which is expected to develop similar capabilities.

The company has already rolled out AI features that allow users to generate entire slide decks, create bespoke images, and translate designs into multiple languages automatically. Industry analysts believe these functions will help Canva hold on to enterprise customers, who are increasingly looking for productivity gains rather than just basic design tools.

Position in the Global Market

The design software sector has become one of the more competitive areas of cloud computing. Adobe’s $20bn attempt to buy Figma was blocked by regulators in 2023, leaving the US group to push its own offerings harder. At the same time, Figma and Canva have expanded aggressively into corporate accounts where subscription revenues are higher and customer loyalty stronger.

Canva’s edge lies in its combination of scale and accessibility. Its freemium model draws in millions of casual users, a portion of whom convert into paying subscribers. The company has also developed a suite of enterprise products, including brand management tools that allow companies to control templates and logos across global teams.

Analysts see this dual approach as a way to protect revenues if consumer demand weakens. By spreading its base across education, small business and large corporates, Canva has a more diversified income stream than some of its rivals.

Speculation on IPO Timing

Despite the surge in valuation, Canva has not commented on when or how it might list. Obrecht and Perkins have previously suggested they are in no rush, noting that the company is profitable and has no pressing need to raise capital.

Even so, bankers in Sydney and New York expect an IPO in the next 18 to 24 months. The company’s US expansion and appointment of a seasoned Wall Street CFO are widely interpreted as signals of intent. Investors say the question is less about whether Canva will list and more about the timing and exchange.

Were Canva to float in New York today at a valuation comparable to or higher than Figma’s, it could immediately become one of the largest software IPOs of the decade. That prospect has stirred debate in Australia over whether its most successful start-ups are being lost to Wall Street rather than boosting the local bourse.

Outlook

For now Canva continues to expand its platform, invest in AI, and grow its enterprise customer base. The latest share sale confirms that major investors believe the company has further room to run, even after more than a decade of rapid growth.

The question for markets is whether Canva can sustain that pace as competition intensifies and expectations rise. Investors will be watching closely for any signs that an IPO is in the works, knowing that when it comes it will be one of the most closely followed listings of recent years.