The Australian technology industry has long been obsessed with Canva, particularly its valuation. This week, that valuation hit $65 billion (US$42 billion) in an apparently oversubscribed funding round. That’s a jump of US$10 billion, or almost a third, in less than one year.
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This latest valuation increase is being linked to the recent initial public offering (IPO) of design software company Figma and its huge share price rise. Figma quickly climbed from an initial price of US$33 to a vertiginous US$122, before falling back to US$70, which is still a US$33 billion valuation.
Given it’s a significantly smaller business than Canva, you can see why the latter’s shareholders, including staff, can barely contain their excitement.
Canva’s unique position
Canva is unique in the Australian startup landscape because no other company at scale has achieved the same level of ongoing astronomical growth and global brand recognition. And in the world of software-as-a-service (SaaS) economics, it is a global leader.
As we’ve explained frequently on The Contrarians with Adam and Adir Podcast, the most widely used measure is annual recurring revenue (ARR), which acts as a proxy for next year’s revenue. Canva has frequently exceeded 50% ARR growth in a single year, and is still somewhere north of 40% based on numbers publicised in April. Maintaining this level of growth is remarkable considering total ARR passed US$3 billion a few months ago and is probably approaching US$3.5 billion.
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At a consistent 40% ARR growth, recognised revenue will be roughly 85% of ARR at any point (feel free to do the maths yourself). Thus, Canva’s trailing 12-month revenue as of April was likely at least US$2.5 billion. The company doesn’t reveal profit or free cashflow beyond saying it’s positive.
Taken together, these metrics imply that the latest valuation was pegged at multiples of around 14-times trailing ARR, and perhaps 17-times trailing revenue. At a guess, it’s valued at over 100-times trailing free cash, but that’s largely irrelevant for these businesses – welcome to 2025!
Is Figma a true competitor to Canva?
In truth, Figma isn’t really a true Canva competitor, and Canva’s long war will be fought against far bigger titans – including at least two trillion-dollar companies.
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Canva’s products have historically been used by individuals and small businesses, but more recently, the Aussie company has started successfully signing enterprise customers. While this is the same customer market as Figma, despite looking superficially similar, the two software companies focus on different use cases.
Canva is predominantly about content creation and presentation, while Figma is very big with product and software development teams.
Nevertheless, Figma is still an interesting valuation proxy for a potential Canva IPO.
In 2024, Figma booked revenue of US$820 million, and ARR has probably grown to around US$1 billion. Therefore, Figma trades at 35 to 40 times trailing revenue and 35 times ARR. These multiples are twice what Canva investors just paid, and for a business with the same growth rate coming off a lower base. In the current euphoric market, this potentially makes Canva look cheap!
But Figma also has some other fantastic metrics that are likely to excite investors.
The first is net revenue retention (NRR), which is running at 132% – an incredibly impressive number. It means that, on average, Figma customers are spending a third more than they did the previous year, even after accounting for those who left or churned. That is a great sign for future growth as well as product-market fit. Canva doesn’t reveal its NRR, but it could well be similar.
The other big story for Figma is net profit. Incredibly, very few software businesses with US$1 billion sales make any profit, but Figma is an exception. It delivers a net margin of some 20%, which, on analysts’ forecasts for 2025, would deliver US$220 million of net profit. While that’s a toppy price-to-earnings multiple of 150, it’s still only half the multiple of Aussie medical software company Pro Medicus! Welcome, again, to 2025.
The design war is coming
While Figma does provide an interesting comparison point, Canva’s future is more likely to be affected by major competitor Adobe, a $150 billion company whose revenue is 10 times Canva’s — although growing much more slowly.
Adobe throws off $800 million a year in free cash and is currently using its very deep pockets to vigorously target Canva’s customer base with a new suite, including AI tools that dynamically create beautiful content from text prompts.
Also pursuing an almost identical strategy is no less than Microsoft, with its newly upgraded Microsoft Designer tool. It, too, is designed to be a Canva killer, but it’s a much more dangerous foe.
The big tech giant has a huge incumbency advantage across both enterprise and small business, with a multi-decade strategy of defeating competitors by unifying offerings onto a single platform. Often, the convenience means these products don’t even need to be best-in-class; think early MS Office.
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Canva has taken the first tentative steps towards a novel integration of its own, creating spreadsheet software that easily creates visually appealing outputs. This puts it into conflict not just with Microsoft but also with Alphabet’s Google brand.
Thus, a very large war is taking shape that will involve at least three major players battling to become the integrated platform for beautiful design and content. It may not be a winner-takes-all market, but one will become the dominant software for key workflows and tasks.
Microsoft is clearly the incumbent gorilla and is an extremely ferocious competitor. Google is now also in the mix. Long-time Canva rival Adobe has some strengths but also some major vulnerabilities, which is why it tried to buy Figma for US$20 billion back in 2022 (it was blocked by regulators).
Canva’s strengths include a significant lead in the category, a strong brand, and well-established user familiarity.
Assuming Canva has the same strong financial metrics as Figma, it is an even bigger company and would command a higher valuation. But on the downside, it’s also more likely to be involved in the huge AI content creation war against big tech giants, as opposed to Figma’s more niche offerings.
In truth, the upper limits of Canva’s short-term valuation will depend on timing. Stock markets are currently trading at historically high multiples, and large investors are wondering whether the peak is in sight.
If Canva gets in before the market cools, we might even see a US$100 billion valuation by the end of the first day’s trading. That could be a huge boon or a curse once valuations do eventually correct.
