Canva valuation slashed amid ‘brutal’ period for tech

Melanie Perkins and Cliff Obrecht have had an estimated $US5bn wiped from their net worth amid a growing technology bloodbath.

Canva founders Cliff Obrecht and Melanie Perkins. Source: Max Doyle

Australia’s largest venture capital firm Blackbird has slashed its valuation of start-up darling Canva by 36 per cent – about $US14.4bn ($20.7bn) – as a rapidly changing landscape forces it to take historic losses.

The Sydney-based Canva became Australia’s fastest-growing company in September 2021, with co-founders Melanie Perkins, Cliff Obrecht and Cameron Adams growing their start-up to be more valuable than the likes of Telstra and Woolworths in a $US200m capital raise.

But the company’s valuation has now tumbled by more than a third amid what cornerstone investor Blackbird says has been a brutal period for both public and private tech companies.

It marks one of the biggest implosions of value in Australian business, and underscores how quickly the landscape for technology companies has changed.

A Blackbird spokeswoman said Canva’s holding value has been reduced by 36 per cent from the capital raise completed in the second half of 2021.

Blackbird held around 14 per cent of Canva at the time of that raising.

At least $US5bn would be wiped off the value of co-founders Melanie Perkins and Cliff Obrecht’s stake in Canva based on Blackbird’s revaluation of the firm, in what is one of the bigger falls on among the ranks of The List – Australia’s Richest 250 this year.

But Canva is adamant the same downturn that has slashed technology company valuations will bring “unprecedented opportunities”, as its clients also look to cut costs.

“While the overall market landscape has changed, our growth trajectory is unaffected,” a Canva spokesman told The Australian.

“We continue to see unprecedented growth in teams and workplaces as they look to tighten budgets by consolidating their marketing and visual communication tools into Canva, and we’re confident that no matter the market conditions, we’ll exceed our current valuation in the not-too-distant future.

“We’ve only achieved 1 per cent of what we set out to do and remain as excited as ever about the 99 per cent ahead.”

Canva’s new valuation of $US25.6bn ($36.8bn) is the result of an independent valuation process that was completed by a big four accounting firm and adopted by Blackbird’s valuation committee, a spokeswoman for the investor said.

“The external valuer used multiple methods of valuation, the primary method being comparable listed companies. This was cross-checked against completed secondary transactions and a discounted cash flow model. They also noted the range of valuations of other investors,” she said.

But Blackbird still sees Canva at the forefront of its industry.

“Canva remains one of the very best software companies in the world. What’s become clear in benchmarking Canva’s progress, is that Canva is growing faster and with greater efficiency than almost all of its top listed peers,” the spokeswoman said.

“You don’t need to look far on the horizon to see Canva’s valuation once again passing US$US40bn and we’re confident it will emerge from this period as an even stronger business. “After an exuberant period in 2021, the public markets have been brutal on tech companies. “The new holding valuation reflects this public market decline. It doesn’t reflect any reduction in Blackbird’s enthusiasm for Canva.”

Canva, which produces online design software, has long been one of Australia’s fastest growing tech companies and has made billionaires out of its co-founders Melanie Perkins, Cliff Obrecht and Cameron Adams. A June 2020 raising put its value at $US6bn. By April 2021, another raising saw it hit $US15bn. In September, Canva hit a record $US40bn.

The Blackbird said that some of Blackbird’s funds have seen their value reduce by up to 30 per cent compared to the prior quarter, blaming the sharp decline in public markets.

“After an unprecedented rise in valuations for both public and private technology companies during 2021, the first six months of this year saw a significant unwinding of these valuations. The reduction in the value of our funds reflects this decline,” the spokeswoman said.

“We have built our holdings over many years and most of the value of the funds has been created by the operational progress of the underlying portfolio companies. Even as multiples contract, the funds are still showing strong overall returns and are well positioned to grow as the companies continue to grow from here.”

Blackbird Ventures general partner Nick Crocker. Picture – Supplied

The spokeswoman said that for Blackbird’s more mature holdings – the majority of its portfolio value – it has changed its valuation methodology from ’last round to ‘market-to-market’ which is completed by an independent external valuer.

“We will continue to do this going forward,” she said. “For the rest of our portfolio, which is early stage and hard to comp to listed markets, we have taken a provision against the valuations that we consider at risk of having too high a valuation.

“This updated valuation process ensures the portfolios are now held at a value that takes into account the current market and has been set in a transparent, objective and consistent manner.”

On Wall Street this week tech sector valuations will be in focus with Microsoft, Amazon, Apple, Facebook owner Meta and Google parent Alphabet all set to report their financial results.

Blackbird partner Nick Crocker told The Australian on the weekend that the sentiment around listed stocks has had an impact on privately held start-ups.

“Public market valuations have had a severe retreat and that is now cascading down through the private markets, with growth rounds being reset, series B and C rounds impacted and so on through the early stages,” he said.

“For seed and A, there is still a digestion in progress but we are noticing rounds from last year being reopened at the same ­valuation to new external investors, which is a relatively new phenomenon.”

Canva has built an online Photoshop rival that can be used to create social media graphics, presentations, videos and more.

Co-founder Cliff Obrecht, who tied the knot with Ms Perkins in January 2021 on Rottnest Island, first revealed plans to The Australian in an interview that he hoped his wealth could be used to enact change. He and Ms Perkins are joining a growing list of tech billionaires using their cash towards progressive causes.

“I think with running such a large company with such a significant valuation now, it’s an obligation on us to use that to be a force for good and make the world a better place, rather than just hoard shit. There’s only so many beds you can sleep in on any one night, and only so many steak dinners you can have.”

“The billions upon billions of dollars is more than anyone needs in their entire lifetime by a longshot,” co-founder and CEO Melanie Perkins added.