Canva's Valuation Cut: A Deep Dive into the Downward Revision
Canva’s backers cut $7.1bn from its valuation, and its own valuer cut more.
Blackbird and Airtree have trimmed the Canva valuation by a significant $7.1 billion, reducing it to $34.9 billion—a 17% drop. Canva's internal mark has plummeted even further, surpassing its investors' revision. This internal downgrade is crucial as it sets the price employees can sell shares at, falling from $38.9 billion to $31 billion over the past year. The cut amounts to approximately $7.1 billion in US dollars or A$10 billion, depending on the source.
The Catalyst: Revenue Downgrade and AI Expenses
This dramatic shift follows a revenue downgrade attributed to the soaring cost of running frontier AI models. Canva experienced a 25.2% growth in second-quarter revenue reaching $921.9 million, missing internal guidance. While Melanie Perkins, CEO, attributes the missed target to strong user demand for new AI features, she acknowledges the need to reduce the cost of completing AI tasks before broad rollout.
A New Economic Reality for AI in SaaS
Derek Hernandez, a senior research analyst at Pitchbook, offers a structural explanation: "AI is making SaaS no longer a zero marginal cost solution...up until now, software’s secret sauce." Canva and Figma, two leading design tools, encountered similar hurdles around the same time. While Figma reported 48% growth and raised its outlook, its stock fell 16%, with free cash flow margins dropping from 27% to 14%.
The implications are clear: the rise of AI is transforming the economic model for SaaS companies, shifting them away from near-zero marginal costs towards models more reliant on computational resources.