Adding to the slew of tech startup valuation markdowns, global investment management firm T. Rowe Price significantly marked down its stake in popular digital design platform Canva. The markdown amounts to a staggering 67.6% decrease in valuation, raising concerns about the future prospects of the popular Australian tech unicorn.
This development comes nearly a year after Australian venture capital firm Blackbird cut its valuation of Canva by $14.4 billion to $25.6 billion (both in USD), after adopting a “strengthened” valuation methodology across all its venture funds, which marked a decrease of 36%. This also comes months after T. Rowe Price wrote down its investment in Canva by an additional 30%, signaling the second mark down of Canva by the global investment management firm within a year.
Canva, founded in 2012, quickly gained popularity for its user-friendly graphic design platform, attracting millions of users globally. The company has achieved significant milestones, including reaching a valuation of $15 billion in 2021. Canva’s success has been attributed to its intuitive interface, extensive template library, and accessibility across multiple devices. The platform has been widely adopted by professionals, entrepreneurs, educators, and individuals seeking to create visually appealing content.
Nonetheless, this recent markdown raises questions about the company’s ability to sustain its growth trajectory in the ongoing challenging economic environment, especially since sustaining the momentum that made it a successful unicorn and meeting heightened investor expectations requires continuous innovation, differentiation, and expansion into new markets.
This markdown comes at a time when investors have become increasingly cautious and selective, particularly in the wake of global economic uncertainties and concerns about inflated tech valuations. Factors such as Ukraine war related geopolitical tensions, trade disputes, and the aftermath of the COVID-19 pandemic have created an environment where investors are more cautious and discerning in their investment decisions. The funding winter (and a subsequent funding crunch) has seen several high-growth startups across the globe face downward valuation adjustments as private investors reassess risk and growth potential.
To date, T. Rowe’s Blue Chip Growth Fund owns several classes of Canva shares (mostly Series A shares) and has invested $99.1 million in Canva so far. In its prospectus dated March 31, the Fund valued the shares on a cost-adjusted basis at $32.1 million (which is still far from the $40 billion Canva was valued at before Blackbird cut its valuation).
Coming to Canva’s response to the matter, a spokesperson for the company announced that they were “well positioned to continue doubling down on key initiatives, including growing our team and expanding our product and AI innovation efforts.” The spokesperson went on to inform that Canva is currently profitable, and possesses “very healthy cash reserves.”
“We’re experiencing rapid and accelerating growth across all of our metrics, having recently surpassed 135 million monthly active users. It would be inaccurate to determine the valuation of Canva based on any one investor in isolation, and with our growth and pace of new product launches, we’re confident that no matter the market conditions, we’ll exceed our last valuation as the markets correct and our growth continues,” the spokesperson added.