Canva – a mysterious Australian unicorn

canva unicorn story

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The story of Canva and its founder, Melanie Perkins has long been of interest to me. Unlike other successful and unsuccessful unicorns, there hasn’t been much hype about it. The company went through the first 2 rounds of funding, without the press paying much attention to it (distracted by other more “exciting” cases of WeWork, Uber, etc.). And yet, despite raising a staggering $251mln to date (June 2020), the company has been profitable since 2019 (looking at adjusted EBITDA).

How did they get to this point? What was the key to their success and rapid growth? Could this be the next “hockey stick” IPO?

As its founder rarely gives interviews and has only recently appeared on several podcasts and spoke at a limited number of conferences, it was hard to extract information that was not pure speculation. And yet the puzzle pieces that were available formed an interesting picture. Here is the Canva story as of June 2020.

The beginning

Canva’s founder, Melanie Perkins was born in Perth in 1988 (exact DOB is unknown), daughter of an Australian-born teacher and Malaysian engineer with Filipino and Sri Lankan roots. According to her own admission in an interview with Jason Calacanis in 2019, Melanie always loved “solving problems” (read, “having her own business”). At the age of 14 she sold hand-made scarves to fellow “Perthians”.

At 19, our business prodigy taught her fellow students at the University of Western Australia how to use graphic design programs, as part of her communication and commerce studies. The young entrepreneur saw how difficult it was to create a design and print out flyers with that design and that is how her first official SaaS (Software as a Service) company was born. It was called “Fusion Books”.

Fusion Books

Taken from a still functional Fusion Books website: https://www.fusionyearbooks.com/

Fusion Books was a Flash website that allowed to build… yearbooks. The key here was that this was a niche yet very underserved market. Melanie and her then boyfriend (now fiancée) co-founder Cliff Obrecht focused their efforts on cold-calling and selling the solution to schools, while outsourcing most of the technical development work to freelancers. After reaching 400 schools, some of which were based as far as Europe, the couple realised that they needed venture backing. Around this time, they began to have more ambitious plans about making graphic design more fun and easier to learn.

Trouble was, this was 2010 – there was little to no venture capital in Australia.

The entrepreneurs saw an opportunity when an American investor, Bill Tai came to Australia for an event. Perkins and Obrecht approached Bill…and failed to secure any funding. However, this was just the start. What proved crucial at this point was: a) making other connections at the event, b) securing Bill’s email.

The birth of Canva

While struggling to secure funding, but continuing to work on the idea for Canva (which is what technology from Fusion Books went into), Perkins kept in touch with Bill. According to Melanie’s own recollection, at one point she mentioned to Bill that she would “drop by” in U.S. By “drop by”, she meant, “I will fly thousands of miles to meet you”. But who wants to seem desperate?

Canva was pitched on a napkin (a perfect Silicon Valley story), and this time Bill decided to get on board. His biggest contribution would be to help connect Melanie with the right people, who would later join her team. And you remember that original event where they met? Well, that led to Canva getting its own CTO – Cameron Adams (ex-googler, and tech product guy). And so the tide turned – following the appointment the company got it’s first $3mln pay check and it was officially launched in 2013.

More money

What’s interesting about the first investment is where it came from. $1.6mln was raised from investors, while another $1.4mln was raised from the Australian government. Even more so – this was a grant that did not cost Canva ANY equity. That is how you do it kids. Next rounds followed in this order:

2015 – series A

2106 – Series B

2018 – Series C

2019 – Series D. (The “special one” – an American legendary venture capitalist and investor, Mary Meeker got involved in this $70mln round – another big player joins Canva on its way to the top).

By 2019, Canva had 700 employees, 250k print orders through their printed product, launched its enterprise product ($30/month), 1 billions designs created, 20 million users across 190 countries, with 85% of Fortune 500 companies using the product ( stated so by Canva themselves). The company was also highly successful at expanding into the challenging Chinese market, and according to Melanie the key was to hiring some local experts and transferring large parts of Canva team to China.

Acquisitions

Canva has also been very strategic when it comes down to acquisitions of other companies. In 2018, the company “swallowed” presentations startup Zeetings, as part of its bid to take over the presentations space.

In May 2019, Canva announced acquisitions of Pixabay and Pexels, two German free stock photography sites. The sites allow individual photographers to share their work for free, and the photos can now be used by Canva users in their designs.

Pixabay and Pexels were left to manage themselves going forward, and the two companies take in (all of these are estimates) roughly $7.9mln (Pixabay) and $4mln (Pexels). Most of the revenue comes from affiliates and donations, so the deal was probably a welcome step for both businesses, as the German platforms struggled to find a way to grow and monetise beyond their current state.

Considering that the above monetarily would have added very little to Canva, the acquisition from a strategic point of view was spectacular. This deal saw thousands of photos added to Canva’s library, enhancing: value for their clients, building up their client base and (let’s not forget!) taking away this opportunity from Canva’s competitors in the market.

The brilliance of Canva

canva stay frugal
Canva and its brilliance

So what can entrepreneurs and businesses around the world learn from the example of Canva? Let’s try to sum it up here:

  1. Start small. If you identify a problem, approach the smaller segment of the market that you can easily dominate (yearbooks), and build on that.
  2. To grow you need capital – if you can get a government grant (hello, Mr Musk), that is an ideal scenario – no payback/equity trade in required. Basically, find free money whatever way you can, that’s your job as a business owner.
  3. As the next step, venture capital can be huge for you in terms of: attracting the right people + getting more money to support your expansion. If Melanie Perkins didn’t approach Bill Tai, she would have never found her way to Cameron Adams.
  4. Find your Cameron Adams, if you are a tech company’s CEO. For a great product you need a great tech team. Get a great tech team – and securing venture capital will be a piece of cake.
  5. Stay lean. Canva’s focus seems to have always been on making profit (hello, Mr. Bezos). In 2019, it may have been only $1.8mln, however compared to unicorns like Uber that burn money left and right, the above will really make you stand out.
  6. Replicate your success in other markets, by supplementing local teams with existing team members – like Canva did in China.
  7. Go into stealth mode – without many PR campaigns, the Canva team has been able to wage partisan warfare vs the likes of Adobe, whose market share they are fighting for.

Melanie Perkins’ ultimate talent – like any successful entrepreneur – has been in finding the right people and raising the necessary funds from investors. The company’s focus, according to its founder has always been: a) build the world’s most valuable company, b)
do the most good. While the latter seems to be more along the lines of Google’s “do no evil”, and may be considered by some more of a general PR move, the former seems to be well within Canva’s grasp.

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