The Canva Case Study: How did it become one of the world’s most valuable startups?
The protagonist of this story is Melanie Perkins, who was born on May 13, 1987, in Perth, Australia, into a middle-class family. Melanie is the daughter of an Australian teacher and a Malaysian engineer of Filipino and Sri Lankan descent.
From a young age, she demonstrated a strong entrepreneurial spirit. At just 14 years old, she started her first business, selling handmade scarves. She has stated in various interviews that this first experience shaped the entrepreneurial drive she would continue to have in the following years, as she never forgot the freedom and excitement she felt building her own business.
She was also known for being a very disciplined girl. She aspired to become a professional skater, so she would wake up at 4:30 AM to attend her daily training sessions.
In 2004, after graduating from Sacred Heart College, she enrolled at the University of Western Australia. There, she majored in communications, psychology, and business.
Meanwhile, while fulfilling his university commitments, he used his free time to teach graphic design classes, thus earning some money to cover his expenses.
In the middle of her classes, she realized that programs like Photoshop and Illustrator seemed too complex. The multitude of steps for simple tasks and the amount of time her students took to learn how to use all the buttons made her think something was wrong, that there had to be a simpler way to create brochures, catalogs, and advertising materials.
“The fact that people had to spend an entire semester learning where the buttons were in design programs was ridiculous,” Melanie said in an interview on CNBC .
Turning a problem into an opportunity
With this premise in mind, in 2007, at the age of 19, she partnered with her boyfriend, Cliff Obrecht, to take out a joint loan of $3,500 and launch a company they called Fusion Books. Initially, Melanie wanted to invest in developing software to streamline the entire design process, but she concluded that it wouldn’t be a logical approach because it would be too expensive, time-consuming, and put her in direct competition with powerful companies. Then, seeing her mother, a school teacher, struggling with the yearbook’s production, she identified this as a promising niche to test the business.
Their idea was to allow schools to easily create yearbooks from a user-friendly online platform with templates and a drag-and-drop system, and then print the finished product for home delivery. Since she had no experience in software development, she used the borrowed money to hire developers to design and build the platform. Because all the money was invested in software development, they had to start operations from Melanie‘s mother’s living room.
In an interview with the Australian Daily Mail, the entrepreneur confessed that her inexperience was a blessing, as it led her to take risks with no other limit than that small loan and the space her mother provided:
“If I had known everything that awaited me when creating a company, I would have been intimidated.” –Those were his words.
During peak season, Melanie‘s mother helped out by filling the printers with ink at night. Meanwhile, Obrecht handled the phone with a cold-calling strategy, a sales tactic used to attract potential customers without them expecting immediate interaction. It wasn’t the most effective strategy, but it helped them make their first sales. Then, they came up with the idea of offering schools a free sample yearbook, and sales increased significantly. When customers asked to speak to a manager, Obrecht simply spoke in a deep voice, so no one would turn their back on him for sounding too young.
With Fusion Books, they learned how to sell, how to build a company from scratch, and how to tackle a host of challenges. These valuable lessons would prove fundamental to the next stages of their careers as tech entrepreneurs.
The business grew so rapidly that Melanie had to drop out of university to dedicate herself fully to managing it. They ended up providing services to around 400 schools, even acquiring clients and distributors in European countries. It was a great start, but Melanie wanted much more. She firmly believed that her project could have deeper applications than just creating school yearbooks, so she set herself the challenge of using the technology behind Fusion Books to build something bigger. Her goal was to transform the complex design programs into an online platform like Facebook —something easy to use. However, to achieve this, she would need access to venture capital funding, something virtually impossible to find in Perth, a city built on mining and petrochemicals.
The young woman says she spoke with over 100 local investors, but they all rejected her. Far from giving up in the face of adversity, she pressed on with the project while patiently awaiting her big opportunity.
Seeking investors to expand their project
In 2011, he learned that a former Silicon Valley venture capitalist, named Bill Tai, had been invited to Perth to judge a startup competition.
Melanie investigated and discovered that Tai had investments in companies like TweetDeck and Zoom, and that he was an expert kitesurfer, so during his stay he planned to take advantage of the impressive waves of the Australian sea. Based on this information, she and Obrecht prepared to ambush Tai and present him with their project.
The first attempt was at a dinner Tai hosted with other investors who were also passionate about kitesurfing. The couple stood before the attendees and delivered an unusual speech for something called “Canvas Chef,” a metaphorical pizza, with design elements as toppings and types of documents (brochures, business cards, restaurant menus) as the crust. “It wasn’t the most elegant analogy,” commented Rick Baker, an investor who heard the speech that night.
The entrepreneurs left without capital, but with a renewed enthusiasm for extreme water sports. From that moment on, they regularly attended subsequent meetings organized by Tai, which included prominent technology executives looking to invest in startups. Some of these meetings took place in Silicon Valley . At one of these gatherings, a friend of Peter Thiel suggested they appoint a single leader for the project, and Melanie stepped up to take on the role.
Despite all their efforts, their search for capital was unsuccessful. Silicon Valley investors weren’t interested in investing in a company founded in a region like Perth, as they considered it a “dead zone for developing a startup.” Dozens of venture capital firms and investors flatly rejected the project, arguing that they didn’t see much point in it and weren’t comfortable investing in a place so far removed from the world’s major technology hubs.
These rejections didn’t discourage the couple. They persisted with their networking strategies to try and attract the attention of potential investors. Little by little, they gained Tai‘s trust, who advised Melanie to learn to kitesurf because the venture capitalists who could put money into their project practiced the sport. She took his advice, started training, and began kitesurfing with them, but the strategy wasn’t without its dangers. On one occasion, with her 9-meter kite floating deflated and useless beside her in the strong current of the eastern Caribbean, the entrepreneur waited for hours to be rescued. As she skimmed the water with her left leg, bruised from a previous collision with a coral reef, she reminded herself that her new and dangerous hobby was worth it. She was willing to take the necessary risks to bring her ambitious project to fruition.
“It was like: Risk: serious damage; Reward: starting the company. If you put your foot in the door a little bit, you have to put it all the way in.” -The entrepreneur said in an interview with Forbes .
After a while, they decided to change their approach to investor conversations: instead of explicitly asking if they would like to invest in their project, they would simply ask for advice. This way, they would avoid being rejected at every meeting and would gradually pave the way for investors to trust them and show greater interest.
Revolutionizing the graphic design industry
Fortunately, all their sacrifice and effort paid off. After a couple of years of networking and kitesurfing, they met Lars Rasmussen, co-founder of Google Maps, who became their main advisor. He expressed interest in the idea but told the founders to put everything on hold until they found a technical team of the caliber necessary for a project of this nature. Shortly after, Rasmussen introduced them to Cameron Adam, a former Google employee with the relevant technical experience to join the team.
Now that they had a technical lead and a stronger team, they gained credibility and managed to raise $3 million to build the platform that would revolutionize the graphic design industry; Bill Tai even joined as one of the project’s first investors. Thus, in 2013, Canva Inc. was born.
“It was an incredibly long period of time, and we received hundreds of rejections along the way, but I think that process was very helpful for us because it meant we had to refine our proposal and clearly define our strategy before we started. So, when we finally secured investment, we were able to operate quickly and effectively,” Melanie explains .
They spent several months developing the new platform and testing it with potential users. They didn’t want to leave anything to chance. They wanted the user experience to be truly enjoyable and rewarding, so that anyone could design without needing technical knowledge.
When the first commercial version of the platform was ready, the launch strategy involved a couple of reviews on tech blogs, but the reach they achieved was very limited. The company’s engineers, who had stayed up late in Sydney to handle the anticipated user registration, went to bed disappointed.
Although they didn’t achieve the expected results on launch day, the truth is that Canva arrived at the perfect time. The rise of Facebook, Instagram, and Twitter was changing the way businesses interacted with customers. From schools to police stations, skating rinks to self-published authors, suddenly everyone cared about their online presence, and Canva was a simple, affordable, and effective way to look good.
Registrations began to trickle in. By the end of the first month, they had surpassed 50,000 users. By 2014, they already had more than 600,000 users who had created 3.5 million designs through the platform. Thanks to these figures, they raised another $3 million in venture capital, this time from Thiel’s Founders Fund and Shasta Ventures. That same year, Guy Kawasaki, renowned for his work with Steve Jobs during Apple’s resurgence in the late 1990s, joined the Canva team as an investor and evangelist.
With the capital raised, they began Canva ‘s global expansion . Obrecht opened the company’s first office outside Sydney in Manila, Philippines. He then hired the former head of LinkedIn’s China unit to build an office in mainland China. This Asian country quickly became one of Canva ‘s most important markets, unusual given how difficult it is for foreign companies to compete there. Recognizing this success, Canva developed a Chinese version of its platform from the ground up, with features like deep integrations with local messaging apps and easy-to-create QR codes, which are popular in the country. McDonald’s China is a client, as is a nationwide real estate brokerage that provides the tool to its 1,000 agents so they can create engaging graphics with ease.
As a business model, the company established a freemium approach. This means that, on the one hand, it would offer a free version of the platform for any user to use; however, this version would have some limitations regarding available resources. On the other hand, it would offer a paid pro version with access to premium content and additional features. Despite this differentiation, the free version is very attractive. It provides users with hundreds of thousands of templates to create different types of content for social media and advertising materials, millions of photos and graphic elements to use in their designs, collaborative work tools, 5 GB of cloud storage, the option to order printed materials for home delivery, and a very easy-to-use editor so anyone can customize designs to their liking without any problems.
Canva’s growth and expansion around the world
During the following years, Canva focused on developing new tools to facilitate the design process, both for individuals and businesses.
As Canva’s user base grew and its technology significantly improved, its rivals began to worry and quickly reacted. In 2016, Adobe, the world leader in design software, announced the launch of Adobe Spark, which later became Adobe Express, an online platform offering free templates and graphic resources for designing various types of content and advertising materials. This platform, very similar to Canva in terms of functionality and business model, was a clear attempt by Adobe to compete with the Australian company.
In 2017, Canva Inc. achieved profitability for the first time, posting net earnings of $1.8 million by the end of the second half of the year. This is a significant achievement considering the vast number of startups that fail because they never become profitable and only survive thanks to investor funding.
In early 2018, Sequoia Capital, Blackbird Ventures, and Felicis Ventures invested $40 million in Canva, valuing the company at $1 billion. Melanie Perkins became the youngest female founder and CEO to achieve a valuation of this magnitude.
In 2019, Canva completed two more investment rounds, one for $70 million and another for $85 million, which raised its valuation to $3.2 billion Wth these resources, the company developed tools for video editing and creating online presentations, and launched two new products: Canva for Enterprise, a version of the platform designed specifically for business clients; and Canva for Education, a version for schools and other educational institutions created to facilitate collaboration between students and teachers. Additionally, it acquired Pixabay and Pexels, two free stock photography sites, to expand the range of images offered to its users.
By 2021, the platform had already surpassed an impressive 60 million monthly active users in 190 countries, counting among its clients renowned companies such as Zoom, PayPal, Salesforce, and American Airlines, among many others. That year, a new investment round of $200 million was completed, valuing the company at $40 billion, a figure that solidified its position as one of the fastest-growing software companies to date.
“Visual communication has become a universal necessity for teams of all sizes in almost every industry. It’s been incredible to see Canva’s continued growth around the world over the past year. More than 60 million people now use Canva for everything from launching startups to raising awareness for nonprofits, supporting remote learning, collaborating in distributed teams, and managing enterprise brands on a global scale. We’re incredibly excited to further accelerate our mission to truly empower the world to design,” Melanie explained when announcing the new round of investment in the company.
And, to close out 2021 in style, the company announced another important milestone: for the first time, it surpassed $1 billion in annual revenue, obtaining income mainly from the paid versions of Canva, but complementing it with services such as printing graphic material and selling premium content to free users.
Current situation and challenges for Canva
Currently, Canva boasts over 100 million users, employs more than 3,000 people, generates over $1 billion in annual revenue, and ranks as the fifth most valuable startup in the world, behind ByteDance, SpaceX, Stripe, and Klarna. Its platform offers over 600,000 templates and more than 100 million graphic resources for creating all kinds of designs. Year after year, the company has developed new tools and features aimed at achieving its overarching goal of democratizing design worldwide: from business cards, flyers, and social media images to catalogs, resumes, video clips, and logos, everything can be done easily, quickly, and with professional results thanks to Canva. And soon, it plans to launch tools for creating simple websites that can replace PDF resumes or event invitation cards. Although the platform is loved by its users, it also has detractors who criticize it, claiming it’s not true design software. In any case, what’s certain is that Canva has caused a real revolution, allowing anyone, without needing technical skills, to create attractive designs for personal and professional use.
Melanie, for her part, is 35 years old, has a fortune of $3.6 billion, is on Forbes’ list of the 1,000 richest people in the world, and is recognized as one of the most influential businesswomen of our time. As CEO of Canva, she introduced protocols to eliminate gender bias during the company’s hiring processes and achieved visible results: at Canva, 41% of employees are women, compared to an average of 28% across the entire technology sector. Furthermore, the entrepreneur stands out for her strong social commitment. Instead of spending her money on extravagant things, she and her now-husband, Obrecht, pledged to donate a large portion of their fortune to charities through the Canva Foundation.
“We want to make Canva one of the most valuable companies in the world and, at the same time, do as much good as we can. We have this wildly optimistic belief that there is enough money, goodwill, and good intentions to solve most of the world’s problems. We believe it’s not just a great opportunity, but a significant responsibility, and we want to dedicate our lives to working toward it,” the couple stated.
Thus concludes the fascinating story of Melanie Perkins, a young entrepreneur who identified a specific problem and decided to tackle it with ingenuity and determination, fully confident that by solving it, she would be making a significant contribution to helping many other people around the world who also needed to be able to create professional designs quickly, affordably, and easily. It was precisely this purpose that allowed her to persevere despite all the rejections she faced in her early days, making her a role model and inspiration for all entrepreneurs who are striving to bring their projects to fruition today. In her own words:
“The most important thing you can do is solve a real problem. If you solve something that deeply affects a lot of people, you’ll be able to solve everything else.”
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