Canva, the Sydney-based design platform, has experienced a significant blow to its Valuation. T. Rowe Price, a renowned mutual fund company, has marked down its stake in Canva by a staggering 67.6%.

This markdown comes after Blackbird, one of Australia’s largest venture operations, already adjusted its Valuation of Canva by 36% in the previous year.

Despite the markdown, Canva remains optimistic about its future, emphasizing its profitability and robust growth. In this blog, we’ll delve into the implications of the markdown and explore Canva’s strategy for continued success.

Canva’s Plummeting Valuation:

Last year, Blackbird revised its Valuation of Canva from $40 billion to $25.6 billion, leading to a 36% markdown.

Now, T. Rowe Price has taken an even more drastic measure by reducing the value of its stake in Canva by 67.6%. T. Rowe Price’s Blue Chip Growth Fund, which primarily holds Series A shares, currently values its Canva shares at $32.1 million, a considerable decrease from the $99.1 million invested thus far.

Canva’s Response and Future Prospects:

When questioned about the markdown, Canva downplayed its significance, emphasizing its profitable status and substantial cash reserves. The company is focused on building a sustainable and enduring business, concentrating on key initiatives such as expanding the team, enhancing product offerings, and investing in AI innovation.

Canva’s spokesperson expressed confidence in surpassing its previous Valuation, citing rapid growth and recent achievements, including surpassing 135 million monthly active users.

He further added:

“As a profitable company with very healthy cash reserves, we’re in a fortunate position to continue focusing on building an enduring company for the long term. Regardless of the macroeconomic environment, we’re well positioned to continue doubling down on key initiatives, including growing our team and expanding our product and AI innovation efforts.”

The Significance of T. Rowe Price’s Adjustment:

Although T. Rowe Price’s investment in Canva represents a fraction of its total assets, it is noteworthy that a prominent asset manager believes Canva’s current worth is significantly lower than its previous Valuation.

Previously regarded as one of the world’s top five most valuable startups, Canva is now estimated to be worth approximately $13 billion rather than $40 billion. This markdown highlights the fluctuating nature of valuations in the startup ecosystem.

Canva’s Independent Valuation and Future Outlook:

Canva’s spokesperson declined to comment whether the company adjusted its independent 409A Valuation to align with T. Rowe Price’s assessment. Nevertheless, it is evident that the markdown by T. Rowe Price is solely an opinion and does not dictate Canva’s overall worth.

Canva, like many other companies, experienced marked-down valuations after the unprecedented highs of 2021. Klarna, for instance, saw an 85% markdown from its 2021 valuation.

Both Canva and Klarna are actively leveraging generative artificial intelligence to drive their transformation and capitalize on new opportunities.

Generative AI and Canva’s Competitive Edge:

Canva and Klarna have integrated generative AI into their respective platforms to enhance user experiences and innovation. Canva’s CEO, Melanie Perkins, stated that while the company utilizes large language models, it intentionally relies less on external sources to ensure user ownership of created content.

With impressive numbers, Canva’s customers have embraced its AI-powered features: over 200 million images generated using text-to-image, more than 1 billion words written with AI text generation, and nearly 2 billion backgrounds removed with the background remover tool.

Canva’s Potential IPO:

Despite the valuation markdown, Canva’s future plans regarding an initial public offering (IPO) remain uncertain. While an IPO may be inevitable for a company of Canva’s size, its spokesperson has confirmed that no immediate plans for an offering are in sight.

However, co-founder and COO Cliff Obrecht have hinted that an IPO is a matter of serious consideration for the 11-year-old company, though the timing will depend on market conditions.

Final Words!

The recent markdown of Canva’s Valuation by T. Rowe Price has raised eyebrows within the investment community. However, Canva remains confident in its prospects, citing its profitability, impressive growth metrics, and commitment to long-term success.

As the company continues to leverage generative AI and expand its product suite, the future holds great potential for Canva, regardless of the market’s current assessment. While an IPO may be on the horizon, Canva’s focus remains on building a thriving and enduring business.