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Good morning! It's Thursday, January 11th. Today, we’re looking at graphic design company Canva, which recently hit a $25.5B valuation with the help of its new AI tools!

THE FEATURE

Canva— Riding the AI Wave to $1.7B Annual Recurring Revenue

If you've ever done anything with graphic design or simply looked at Pinterest, you've likely interacted with Canva and its content. 

The massively popular graphic design platform added $700M to its annual recurring revenue in 2023 to a stunning $1.7B and hit a $25.5B valuation!

The Founding Story

Canva is an Australian company founded by Melanie Perkins and her husband, Cliff Obrecht, in 2013. Perkins had taught at the University of Western Australia and saw firsthand how students struggled to use professional design software, often taking entire semesters to become comfortable with the platforms. 

Perkins' idea was to create a simple, user-friendly graphic design tool with mass market appeal. However, before taking on such a big feat, the two founders knew they needed to get their feet wet in the tech entrepreneur world. 

So, in 2007, they founded Fusion Books, a company with a narrow focus on helping teachers and students design and create school yearbooks. In just four years, Fusion Books became the largest yearbook company in Australia and expanded to New Zealand and France. 

With their thesis of a user-friendly graphic design platform proven, Perkins and Obrecht recruited Cameron Adams, a UI designer at Google, and raised a $1.6M seed round to relaunch Fusion Boks as Canva in 2013. 

The Business

Canva's primary product is Canva Design, and it embodies the original founders' mission of allowing users to create high-quality designs, presentations, and videos easily. 

Canva has a freemium business model with various paid tiers. For example, Canva Pro is a single-user subscription that costs $120 per year and provides access to advanced editing and design functions. Canva for Teams provides that same access to teams of up to 50 employees ($135/year per employee). 

However, Canva in 2024 is much more than a simple graphic design platform— it's a marketplace. Canva Creators allows graphic designers to share their creations with Canva subscribers and earn passive income. Anytime a graphic designer's content license is purchased on Canva, they receive 35% of the revenue. 

This marketplace gives graphic designers a new revenue stream and bolsters Canva with an endless portfolio of high-quality designs. 

Since its start, Canva has constantly released new products, such as Canva Visual Worksuite and Canva Print, to stay on the cutting edge of everything graphic design, and that's the reason for the company's never-ending exponential growth (plus they've been profitable for the past 6 years!): 

• 2018: $84M

• 2019: $105M

• 2020: $500M

• 2021: $750M

• 2022: $1B

• 2023: $1.7B

How They Win: Deploying AI while Keeping Creators Happy

Canva's latest $700M jump in revenue comes thanks to its new suite of AI tools capable of creating graphics from simple user-written prompts.

These tools are so effective that they've attracted an additional 65M customers to the platform in just the last year! To put this user growth in perspective, Canva's user base sits at 150M monthly users with 16 million+ paying subscribers. 

Plenty of design and content creation companies have been rolling out AI tools, but user bases have often met this with apprehension. This is because AI models need to be trained on user content to work properly, leading to the theft of human-created content. 

Like other companies, Canva trains its AI on user data. But, unlike other companies, Canva subscribers are happy to participate because the company set aside $200M in royalty payments for content creators whose designs are used in AI training!

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