April 2, 2022

Is Canva's IPO coming this year?

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Written by: Stephen Masters

With a valuation of $40 billion, Canva is one of the world’s most valuable startups.

As such, investors are interested in knowing more about the possibility of an upcoming IPO.

What is Canva, how does it make money, and should you invest in its IPO?

This article will provide answers to these questions.

A collaborative platform for online design

Founded in 2013, Canva is an online graphic design company based out of New South Wales, Australia. The company provides graphic design services ranging from simple DIY projects, such as customizing a Facebook cover photo, to large enterprise solutions, such as complex team projects.

Canva’s strength is its user-friendly platform based on a generous ‘freemium’ model that offers plenty of free functionalities. Anybody can sign up and start creating their own basic projects for free within minutes. The result is professional looking designs that users can create quickly.

It’s easy to understand why Canva’s free plan is so appealing: it includes 250,000+ free templates, 100+ design types, hundreds of thousands of free photos and graphics, 5 GB of cloud storage and the ability to collaborate and comment in real time with your team.

However, Canva’s real strength lies in its ability to attract users to its paid plans.

A subscription service used by millions around the world

While Canva started out as a free tool, it now makes money from monthly subscriptions, print products, course sales and marketplace fees. The ‘freemium’ strategy attracts users and helps the company build a consistent and loyal following it can then monetize.

Here are Canva’s 5 main income sources:

  • Canva Pro, which is designed for graphic design professionals.
  • Canva Enterprise, aimed at businesses that want to use the platform to aid their design teams.
  • Canva Print, a service that helps clients print out designs on physical materials. The price depends on the type of article chosen, order volumes, country of residence, among others. This service ships items to over 30 countries.
  • Design School, a collection of online and physical design, social media, and branding courses. Online courses are free of charge, while physical classes start at $5.
  • Canva Marketplace, enables users to purchase premium designs for one-time usage. The revenue from these sales is shared with the creators, with Canva taking 35% of the price. For content sold in the Pro subscription, Canva keeps 50% of net revenues.

As of late 2021, Canva had 60 million active monthly users in 190 countries, 3 million of them paid individual users, including 500,000 paid team users.

Canva claims that 85% of the Fortune 500 use its product in some capacity. Notable customers include Warner Music Group, HubSpot, Duke University, and PayPal, among others.

International expansion

Canva is growing at breakneck speed. Canva is quickly becoming a go-to collaboration platform for teams and workplaces around the globe. Since the pandemic began, distributed working has seen team adoption quadruple in 2021.

The company already has 2,000 staff, which represents a 100% increase from 2020, and is expected to double its workforce in 2022. And there is no lack of talent: in 2021, the company received 180,000 job applications.

Based in Sydney, Australia, Canva is expanding internationally. It recently opened offices in Austin, Texas, and it also has offices in Manila, Beijing, London, Wuhan, and San Francisco.

A profitable and cash-flow positive software company

In 2020, Canva generated $700 million in revenue. In 2021, revenues increased 42.8% to $1 billion. To put this in perspective, consider that Canva had revenues of just $25 million in 2017. This represents an increase of 3,900% in just 4 years.

In addition, Canva is both profitable and cash-flow positive. In the first half of 2017, Canva reported a $1.86 million net profit on $25.1 million of revenue. While updated figures are not readily available, Canva’s founders have confirmed the company is still profitable and cash-flow positive.

A $40 billion valuation – which could increase further before IPO

Since its creation, Canva has raised $572.6 million across 14 venture capital fundraising rounds. Notable investors include T. Rowe Price, Softbank, Sequoia Capital, Blackbird Ventures, Felicis Ventures, and many more leading venture capital firms.

In September 2021, Canva raised $200 million, bringing its valuation to $40 billion. This funding came just 5 months after its previous funding round, which brought in $71 million and raised the valuation to $15 billion.

Canva’s valuation nearly tripled in less than 6 months. It is now the world’s fifth most valuable startup, behind ByteDance, Stripe, SpaceX, and Klarna.

A valuation based on forward-looking revenues

Canva is currently valued at a forward-looking revenue multiple of 40.

However, the company is generating strong revenue growth, which is expected to continue over the coming years. The user-friendly interface, affordable pricing, loyal user base and continued international expansion means that it may soon justify its high revenue multiple.

In addition, most software companies trade on very high multiples. For example, Snowflake is trading at 96 times forecast revenues Atlassian is trading at 32 times forecast revenues, and Airbnb is trading at 14 times forecast revenues.

A highly anticipated – yet still uncertain – IPO

Most startups go public after their Series E funding rounds. Canva is already past that point, but it has not officially communicated its intent to go public in the US of Australia. However, its $40 billion valuation is sure to attract considerable interest should the company formalize its IPO intentions. 

Should you invest in Canva’s IPO?

2021 was a record year for the public markets, with plenty of billion-dollar IPOs and SPAC deals being announced.

However, many companies saw their stock prices crash post-IPO.

For example, Robinhood’s stock price is down 70% since its August 2021 IPO.

Thus, investors need to buy shares early before these startups go public.

That’s where the real money is made.

To stay up to date on upcoming IPOs visit preipohunter.com and download the IPO Guide For 2022.

Visit ipowise.net to learn about the Starlink IPO.

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