Canva, Generating Significant Cash, Discusses Share Offer at $37 Billion Valuation
The Takeaway
• Canva discusses arranging a sale of $400 million to $500 million in existing shares
• Sale would value startup at $37 billion, 8% off peak
• Design startup generated about $175 million in cash in Q1
Canva is about to buy itself a little more time before a long-anticipated initial public offering.
The Australian maker of design software is in talks to arrange a sale of shares held by current and former employees that would value the company at $37 billion, according to two people with knowledge of the fundraise. That’s just shy of its peak valuation of $40 billion four years ago.
The sale resembles moves by other mature private firms such as Stripe and SpaceX, which have also let employees and early investors cash out in lieu of doing an IPO.
Canva has told potential investors the sale would amount to $400 million to $500 million worth of shares, according to one of the people. It comes as the 13-year-old startup continues to increase its revenue and generate cash. In the first quarter, it generated $150 million in earnings before interest, taxes, depreciation, and amortization as well as free cash flow of about $175 million.
If it continues at that rate for the rest of the year, it would be on track to generate about $700 million in free cash flow for the year. That’s above the amount for some other recent IPO candidates such as installment lender Klarna, which generated $587 million in cash last year, but it’s far lower than Stripe’s $2.2 billion in free cash flow last year.
Canva is currently generating a little more than $3 billion in annualized revenue, according to a person close to the company. That implies it’s now generating about $750 million a quarter. In the first quarter, it generated roughly $660 million in revenue, according to one of the people with knowledge of the fundraise. Adobe, for reference, made $5.87 billion in sales in the quarter ended May 30.
Such measures of financial strength are the kinds investors and investment bankers say they want to see before a privately held startup starts planning a public offering. The company, which employs more than 5,000, has been profitable for eight years and has more than $1 billion in the bank, according to a person close to the company.
Canva executives led by CEO and co-founder Melanie Perkins have said a public listing is in its future, but not soon. In November, the company hired Kelly Steckelberg as its new chief financial officer, in part because she had taken Zoom Video public in 2019.
But Perkins and co-founder Cliff Obrecht have said they want to focus on making product investments that future public investors will prioritize, such as investments in artificial intelligence.
Canva charges from $15 per user, per month, to more than $30 a month for groups of at least three people to access its premium features for creating visual content, from flyers and social media graphics to pitch decks and résumés. It’s increasingly focused on selling to corporate customers in contracts worth more than $1 million.
The software, which competes head-to-head with long-standing Adobe products such as Photoshop, has roughly 240 monthly active users, up from 226 million at the end of the year, and counts 26 million paying subscribers.
Over the last year, Canva has also been actively acquiring companies to boost its AI capabilities. This week the company said it was buying MagicBrief, an Australian startup that sells AI-powered advertising analytics tools. In July, it bought Leonardo AI, another Australian AI startup, whose technology now powers some of Canva’s AI image-generation software.
In the meantime, it has joined a parade of mostly older startups arranging large sales of existing shares that allow longtime employees and investors to cash out of their private stock holdings, without a public listing.
In early 2024, the company arranged for a sale of more than $1 billion of employees and investors’ shares in a deal that valued it at $26 billion. In October, investors valued the company at $32 billion in a secondary sale. Both those valuations are down from Canva’s peak of $40 billion in 2021, when it raised $200 million from investors led by T. Rowe Price.
The Australian Financial Review earlier reported it was planning a new share sale without details on price or size.
Meanwhile, Figma, an American rival that focused more on corporate clients than Canva did initially, in April filed confidentially with the Securities and Exchange Committee for an IPO.
Figma was generating roughly $900 million in annual recurring revenue at the end of last year.