Inside Canva’s hardest year: AI bills, a markdown and no float

More than 200 million people use Canva without paying a cent, making birthday invitations and school posters and the slides for Monday’s meeting on a Sydney-built website that turned design software into something anyone can use.

For a decade, those free users were the company’s greatest asset, a marketing machine that cost almost nothing to run. Artificial intelligence has turned them into a bill and that bill has upended the most valuable private company Australia has ever built.

Every request they make now runs on computers someone has to pay for. This month, in large part because of it, Canva cut $10 billion from its own valuation.

“Historically, the cost to create a design cost us essentially nothing,” co-founder Cliff Obrecht told Stripe’s John Collison on a Sydney stage on August 19. “The cost of goods to serve a user has gone from cents per month to many, many more cents.”

The problem runs wider than three founders in Sydney. Canva is the most valuable private company Australia has built. About 5500 people work there, most holding shares, and Australian venture funds, wealthy investors and superannuation money sit on its register waiting on a float. What happens next decides whether the biggest success story in Australian technology banks its winnings, or becomes a cautionary tale about a company that had its moment and let it pass.

This is becoming a national test, too: Canva is among the closest things Australia has to a technology champion, better capitalised and further into AI than almost anything else here. If it cannot make the economics work with 265 million users and $US1.5 billion in the bank, the odds facing every other Australian company trying the same thing are worse.

Software firms typically keep 80 to 90 cents of every dollar because, once the product exists, the next customer costs almost nothing. AI has effectively broken that maths. At Canva’s scale, Obrecht said, paying users now have to subsidise the free ones.

So the company slowed its biggest ever launch to protect profits, cut its revenue growth forecast from 30 per cent to 20, and has since cut the cost of running AI by about 90 per cent. “We knew this transition would mean balancing our near-term growth with investing in the enormous opportunity ahead, and we’ve always been willing to make those long-term decisions,” chief executive Melanie Perkins told this masthead.

This month two of Canva’s biggest Australian backers, venture capital firms Blackbird and Airtree, cut the value of their stakes by 17 per cent, to $US34.9 billion. An independent valuer set the price of shares handed to staff at $US31 billion, down from $US38.9 billion a year ago. Share broker Hiive has been quoting stock at a price valuing the company at $US30 billion, nearly 30 per cent below the last official figure.

Canva says that internal price is a conservative tax calculation, not a real sale price, and that listed rivals have fallen much further: Adobe is down about 23 per cent over the past year, HubSpot 45 and Figma 68. That argument cuts both ways, however.