Canva: How a young kitesurfer built a $3.2 Bn (Profitable!) startup

Canva CEO Melanie Perkins
Eoin Noonan via Getty Images

On a steamy May morning in 2013, Canva CEO Melanie Perkins found herself adrift on a kiteboard in the channel between billionaire Richard Branson’s private Necker and Moskito islands.

Her 30-foot sail floating deflated and useless beside her in the strong eastern Caribbean current, the 26-year-old entrepreneur waited for hours to be rescued. As she treaded water, her left leg scarred by a past collision with a coral reef, she reminded herself that her dangerous new hobby was worth it. After all, it was key to the fundraising strategy for the design-software startup she’d co-founded with her boyfriend six years before.

Canva was based in Australia, thousands of miles from tech’s Silicon Valley power corridor. Getting a meeting—much less funding—was proving tough. Perkins heard “no” from more than 100 investors. So when she met the organiser of a group of kitesurfing venture capitalists at a pitch competition in her native Perth, Perkins got to training. The next time the group met to hear startup pitches and potentially write crucial early-stage funding checks, she’d have a seat at the table—even if it meant having to brave treacherous waters. “It was like, risk: Serious damage; reward: Start company,” Perkins says. “If you get your foot in the door just a tiny bit, you have to kind of wedge it all the way in.”

Such perseverance has long been a necessity at Canva, which began as a modest yearbook-design business in the state capital of Perth on Australia’s west coast. From those remote origins, Canva has grown into a global juggernaut.

Twenty-million-plus users from 190 countries use the company’s “freemium” web-based app to design everything from splashy Pinterest graphics to elegant restaurant menus. Besides an impossible-to-beat price (millions of users pay nothing at all), Canva’s key advantage over rival products from tech giants like Adobe has been its ease of use. Before Canva, amateurs had to stitch together designs in Microsoft Word or pay through the nose for confusing professional tools. Today, anyone, anywhere, can download Canva and be creating within ten minutes.

“The three of us had no idea how to run a company,” says Cameron Adams (left), with co-founders Cliff Obrecht and Melanie Perkins at Canva’s former Sydney headquarters. “When I met Mel and Cliff, I could feel the jigsaw pieces coming together.”

The company’s revenue comes from upselling to a $10-a-month premium version with snazzier features or, more recently, from sales of a streamlined corporate account option. High-quality stock photos—of which Canva has millions—cost another $1. It adds up. This year the company expects to more than double its revenue to $200 million; its most recent $85 million funding round valued it at $3.2 billion. Perkins, an alum of the 2016 Forbes 30 Under 30 Asia list, has an estimated 15 percent stake, valued at $430 million. Throw in her 34-year-old co-founder—and now fiancé—Cliff Obrecht’s similar stake, and the Aussie power couple are likely worth more than $800 million.

In an era of billion-dollar cheques from SoftBank and high-profile profligacy at WeWork, Perkins and Obrecht do things differently. They are couch surfers who prefer budget trips to private jets. (This summer, with Canva already valued at more than $2 billion, Obrecht proposed to Perkins in Turkey’s backpacker-friendly Cappadocia region with a $30 engagement ring.) Rarest of all: Canva says it’s been profitable—at least using the favored startup metric of adjusted EBITDA, which strips out stock-option expenses, financing and tax costs—since 2017. “We have been really conscientious about not taking on too much capital because we’ve been profitable for the last two years,” Perkins says.

It all starts with Perkins, who onboards every new employee (now 700 in total) with a thorough rundown of Canva’s most sensitive financial numbers and past investor pitch decks. Other unicorn founders boast. Perkins keeps receipts. And as Canva grows she’s trying to prove you can build a global tech giant from anywhere. “Melanie is a rare breed of entrepreneur, the likes of which you don’t find often anywhere,” says Mary Meeker, a seasoned internet investor whose new firm, Bond Capital, made Canva its first official investment in May.

Perkins’ family jokes that she has a 100-point plan for changing the world. First, Canva has a much more straightforward challenge: Win over big business. Like Atlassian, Slack and Zoom before it, Canva faces a classic dilemma: A freemium model can make you viral, but most users will never pay a dime. And though Canva says it has users inside almost every large corporation today, they’re typically rogue individuals or small teams, not official corporate accounts. Moving upmarket means increasingly brushing up against Adobe, the $149 billion (market cap) graphics giant that took in $1.65 billion in revenue last quarter from its design-focussed unit alone. Then there are a host of high-flying startups like Figma and Sketch that cater to pros but could easily move into the consumer space. And that’s not even considering Canva’s ambitions in new mediums like video and presentations, which could pit it against everything from small Instagram video-making apps to Microsoft, maker of the blockbuster PowerPoint. 

It’s daunting, to say the least, but for Perkins, who has already turned doubting Silicon Valley players into eager supporters and mastered the Chinese market—and has built a $200 million-plus bank account—it’s all according to plan. “I feel like we’ve done an incredible job, but we’ve done very little compared to what we want to do. We’ve done 1 percent of what I think is possible,” Perkins says. “Our company mission is to empower the world to design. And we really mean the whole world.”

Perkins started working on what became Canva in 2007 from her mom’s living room in Perth. The daughter of an Australian-born teacher and a Malaysian engineer of Filipino and Sri Lankan heritage, Perkins had wanted to be a professional figure skater, enduring an adolescence of 4:30 am wake-up calls before enrolling at the University of Western Australia. There, while teaching fellow students basic computer design as part of her communications and commerce studies, she had an idea. The process of designing and printing a poster or a flyer—composing it in Adobe Photoshop or Microsoft Word, converting it to the right size and saving it as a PDF, and taking it to a store like Staples to print—seemed cumbersome in the age of the internet. Wouldn’t it be much better to do it all in one place with one online tool?

“The idea of making design really simple was the first idea,” she says.

The problem felt so obvious that Perkins feared someone else would build a solution first if she delayed. So she hired freelancers to build a Flash website to target one niche she identified as steady and underserved: school yearbooks, typically the responsibility of student volunteers.

Obrecht and Perkins’ startup, Fusion Books, found a market immediately. And with one semester of college left, Perkins put her studies on pause. In peak season, Perkins’ mom fed the printers ink overnight. Obrecht worked the phones cold-calling prospects. When schools asked to speak to a manager, Obrecht simply lowered his voice. The business eventually reached 400 schools, with licensees as far off as France. It was a start. But Perkins couldn’t go much farther without venture funding, then virtually impossible to find in Perth, a city built on mining and petrochemicals.

Perkins spotted—and seized—the narrowest of opportunities in 2011 when a longtime Silicon Valley venture capitalist named Bill Tai came to Perth to judge a startup competition.

A skilled kitesurfer who had backed TweetDeck and Zoom, Tai was in town mainly to play in Perth’s killer waves. Perkins and Obrecht sniffed out a dinner Tai was hosting and ambushed attendees with a pitch for something called Canvas Chef: A metaphorical pizza, with design elements as the toppings and document types—flyer, business card, restaurant menu—as the dough. “It wasn’t the most stylish analogy,” says Rick Baker, an investor who saw the pitch that night.

The founders left without any capital—but with a newfound enthusiasm for extreme water sports. They became fixtures at Tai’s subsequent kitesurfing gatherings, which featured prominent tech executives looking to invest in new startups. In Maui, after a friend of Peter Thiel’s told them they needed a single leader, Perkins became sole CEO.

Perkins and Obrecht were having worse luck in their visits to Silicon Valley’s venture capital gatekeepers on Sand Hill Road. Dozens of firms passed on the little-known, romantically linked co-founders from a startup dead zone. “I’m honestly, and unfortunately, not comfortable doing a deal in Australia,” wrote one. “I am not sure it’s going to make sense just yet,” another said.

In the end, the wave-chasing connections paid off. Through the group they met Cameron Adams, 40, an ex-Googler who had founded a startup based in Sydney. Expecting to meet with them as an advisor in March 2012, Adams would sign on as third co-founder the following June. Now that they had a technical leader, the founders broke through: Canva raised $3 million in seed funding in two tranches in 2012 and early 2013, including a crucial matching grant from the Australian government.

The company launched in August 2013 to a couple of reviews on tech blogs and few users. Adams and Canva’s engineers, who stayed up late in Sydney (the company relocated there in February 2012) to handle the expected influx of sign-ups, went to sleep dejected. What no one knew yet was that Canva’s timing was perfect. The rise of Instagram and Twitter were changing how businesses reached customers. From schools to sheriff’s offices, skating rinks to self-published authors, everyone suddenly cared a lot about their online presence. Canva was an affordable way to look good. The trickle of sign-ups grew to 50,000 users in the first month; by 2014, when Canva raised another $3 million from Thiel’s Founders Fund and Shasta Ventures, 600,000 users had made 3.5 million designs.

In China, historically a fool’s errand market for Western software makers, Canva is a rare success. Obrecht—a tall, amiable presence who, as COO, often rallies the troops (or delivers bad news)—opened Canva’s first office outside of Sydney, in Manila, in 2014, then hired the former head of LinkedIn’s China unit to build an office in mainland China. Today, a local engineering team handles a China-first version of Canva built from the ground up with features like deep integrations with Chinese messaging apps and easy-to-create QR codes, which are popular there. McDonald’s China is a customer, as is a nationwide real-estate brokerage that offers the software to its 1,000 agents.
 
When it comes to serving big businesses, Canva is still a rookie. Its October launch of Canva for Enterprise came at a private event in New York. Perkins addressed staffers from about 100 companies, including Equinox, JPMorgan and HubSpot. 

A slow start for Canva’s enterprise business won’t sink the company. This December, the company matched more of Adobe’s own features by announcing a video-editing tool and an apps suite; it’s still working on improvements to its free alternative to Microsoft PowerPoint, which has already been used to make 80 million presentations. But Canva’s long-term growth prospects depend on whether corporations will progress from small pockets of fans to accounts reaching thousands of employees. After years of adding more features to Canva’s suite, Perkins is betting on the opposite approach for corporate America. By offering limited sets of templates and options, Canva hopes execs will trust more employees to create their own content. At Realty Austin, a midsize Texas residential and commercial real-estate firm, a marketing team of six used to create all printed handouts and digital assets for its agents to promote events like open houses. Now, with Canva, the company’s 550-plus agents create material for their own listings, faster and on their own time.

Adobe isn’t sleeping while all this goes down. It has offered its own freemium, templates-driven app, called Adobe Spark, since 2016. While Canva claims that its tools are used at 50,000 universities and 25,000 nonprofits, Adobe says it’s given out 23 million free Spark accounts to students and teachers. In December 2017, Adobe reunited with Scott Belsky, the entrepreneur whose social media business Behance it acquired in 2012, to instill a scrappier ethos in its product teams. “They feel like they’re the underdog because they’re like, ‘We’re not the coolest startup,’ ” says Belsky, chief product officer of Adobe’s Creative Cloud unit.

Then there are the typical startup growing pains. Until two years ago, Canva’s tool for editing its core code was so clunky that only five engineers could work on it at a time. Much of the company’s focus last year was on a complete rewrite of the front-end interface of its app. “We’re growing so fast that things are breaking constantly,” Obrecht admits. And in May, Canva suffered its biggest test of customer trust to date. Days after Canva announced that Meeker’s investment had valued the company at $2.5 billion, a hacker in Europe breached its systems, downloading 139 million user names and email addresses before Canva could stop the attack.

Stuck in California, Perkins and Obrecht called and texted with Atlassian’s co-CEOs and cofounders (and Canva investors), Mike Cannon-Brookes and Scott Farquhar, reaching Farquhar as the billionaire was on a runway in Peru en route to Machu Picchu. At their urging, Canva called the FBI and launched a formal review; two weeks later, Canva announced two-factor authentication for all users. Though Perkins says Canva’s users responded by rallying behind the company, it was a warning: With better recognition comes a bigger target on your back.

Those close to Perkins are confident that she can handle the pressure. Guy Kawasaki started his career as a hype-man for Steve Jobs, traveling the world to tout all things Apple in the 1980s.

The former Forbes columnist says he’s happy to end his career doing the same for Perkins, investing in Canva and joining the company as “chief evangelist” back in 2014. “More people can use the democratization of design than can use a Macintosh,” he says. “You don’t have to be in Silicon Valley—you don’t even need to be in America—to be successful. Holy cow.”