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Canva’s 22% shake-up, and why its free users now cost money
On Wednesday 4 November, co-founder and CEO Melanie Perkins told staff that 1,271 people, or 22% of Canva’s global workforce, would be affected by a restructure of redundancies, role changes and relocations, calling it “without doubt the hardest moment in our thirteen-year history”. It is the company’s first major round of layoffs. Departing staff get at least six months’ salary, 12 months of healthcare where that applies, their laptops, the removal of the one-year vesting cliff for some recent hires, and the option to apply for a US$10,000 grant to start a business. A day earlier, the AFR’s Street Talk reported internal data showing Canva’s annualised revenue at about US$3.69B near the end of October, roughly the same run rate as at the start of the year, and monthly active users down 12 million on a year earlier. Canva disputed the figures.
Adir: “They’ve got a problem, and they’re solving a different problem. The problem they’ve got is a growth problem, which is: how do we stop losing customers in the age of AI to a tool that is probably better than our tool, and simpler?”
Adam: “Their growth almost exclusively came from their freemium model. You’d get people on the free package, which is pretty good, and it was basically free for Canva, because it’s effectively just another user with tiny server costs. Now what they have to do is give a relatively very expensive AI product, which costs tokens. They’ve gone from a free funnel from free users into paid users to having to pay for free users.”
Adir: “That’s even if people keep using it. You just described their best-case outcome. Their worst case is they never have to worry about paying for anyone’s tokens, because people churn off the platform.”
Adir on making a LinkedIn post for his luggage brand Tanssu with Claude: “I would not have needed a graphic designer. I don’t want to say a graphic designer couldn’t have done it better, because maybe great graphic designers could have, but I didn’t need it to be better. It looked professional.”
Adam on Canva’s own AI model: “Has anyone you know used it?” Adir: “Plenty of people have told me they’ve cancelled Canva. No one’s told me they’ve used it.” Adam: “Well, that doesn’t bode well in itself, when you only know people who have cancelled.”
Not a cut for growth or cash. A cut for survival
Perkins told staff Canva’s growth had slowed “for the first time in a decade” and that after exploring alternatives she had come to the “difficult conclusion that small changes won’t be enough”. The restructure merges the Product, Growth and Platform teams into one product organisation, makes Sydney the primary home for more product teams, and from January expects most hybrid staff in the office two to three days a week. Canva did not mention AI in the announcement, though in August it told investors it expected revenue growth of about 20% this year, down from 30%, after its AI tools proved more expensive to run than planned. In April, co-founder Cliff Obrecht told the SMH: “We do not have to do layoffs, and we don’t have any plans to do layoffs.”
Adir: “Cutting a quarter of your workforce is like the break-glass thing if there’s a fire. You would never do that. You break the glass and pull the lever to stop the train, and that’s what they just did. They’ve got plenty of cash. That’s not their problem in life.”
Adam: “I’m not saying they are, but if these were Australian-based employees, that’s potentially half the Australian team. We don’t know. They haven’t said.” Adir: “What would you do if you were firing half your Australian staff? That is a bad denominator. So find a bigger denominator: all of our staff globally. Maybe that only gets you a 25% outcome.”
Adir: “I don’t think this is a cut for growth. I don’t think this is a cut for saving cash. I actually think this might be a cut for survival. They think we cannot compete with the large language model frontier businesses that are coming for us unless we go back to feeling much more like a nimble, fast, scrappy, under-pressure startup.”
Adir: “This is a team of founders that is accepting reality. It would be very easy not to face that reality and to just have cognitive dissonance, and it is commendable that they’ve woken up to the reality and they’re prepared to take extreme action.” Adam: “The other side of that is they could have taken this action six months ago. These guys would have realised AI was cutting their lunch well before we all did, because they were inside. They could see the cost of tokens.”
Adam: “They hired way too many people. They should have kept this super lean. Had they kept that at a thousand, fifteen hundred people, they could have been making hundreds of millions of dollars a year. This is the real problem with the venture capital model: had they been bootstrapped, they never would have been able to do this.”
From US$42B to maybe A$10B, and a long winter for Australian tech
Canva’s internal valuation, used to price staff share grants, was set at US$31B in August, down from US$38.9B a year earlier. Two of its biggest Australian backers, Blackbird and Airtree, marked it down to US$34.9B, from the US$42B price set in a share sale in 2025. The SMH reported in August that most of Canva’s staff hold shares, many of them options they were told could make them millionaires on a float.
Adir, speculating on the mood inside: “There are employees in there that have been there for a long time that are starting to wonder whether their shares are actually worth anything, and whether they’re ever going to get an exit. They thought they were worth $10 million, $20 million, $5 million, and now they’d be looking at this saying, am I ever going to get one cent for my shares?”
Adam: “It’s the Atlassian unwind we saw over the last five years. You’re accepting equity as comp and you think you’re getting a million bucks a year, but suddenly you’re actually getting 300 grand a year. It makes it really hard to attract people, and you’ve got to pay employees a lot more cash comp.”
Adam: “I just did a quick Gemini valuation check before we jumped on the show: a tech company generating four billion dollars in revenue, zero percent growth, which is probably being generous, and zero percent profitability. Gemini came back with four to eight billion US.” Adir: “Ten billion AUD, let’s say.” Adam: “Call it six to ten billion AUD. That ten billion AUD actually doesn’t feel miles off at the moment for this business.”
Adir: “If you invested at a ten million dollar valuation, you made a thousand times your money. Those people will be fine. But if you invested at twenty billion USD, you don’t feel so good about it.”
Adir: “If Canva ends up exiting at a ten billion dollar AUD valuation or less, the implications for the Australian tech ecosystem are pretty bad. If it goes to zero, it’s not the end of the Australian tech ecosystem, but it’s going to go into a very long and cold winter.” Adam: “I think zero’s unlikely.”
Adam: “From 2013 to 2025, you could not fault these guys. And then in the last year, it’s been a catastrophe. It’s sort of gone from chocolates to boiled lollies in the space of six months.” Adir: “That’s a great line.”
The golden window: Afterpay took it, and Zuckerberg’s billion is the wrong lesson
Canva has rebuffed Adobe’s approaches over the years, with Capital Brief reporting it knocked Adobe back “countless times”. In August 2021, Afterpay co-founders Nick Molnar and Anthony Eisen agreed to sell to Square (now Block) in an all-stock deal valued at about A$39B (US$29B). In 2006, Mark Zuckerberg turned down Yahoo’s US$1B offer for Facebook.
Adir: “However good you think things are, they could not be better for you than they were for Canva for a decade, and now they’re in a very serious hole. There are golden windows and you’ve got to get through them, and the time to transact is when everyone, including you, thinks there’s only upside.”
Adir: “Canva could have IPO’d this business two years ago with no problems whatsoever.” Adam: “I’m not sure they would have. I think the better option clearly was selling to Adobe when they had the opportunity. That was the big strategic miss.”
Adam: “Selling would have been what Nick Molnar and Ant Eisen did. Afterpay would have been absolutely smashed. They sold at the perfect time.” Adir: “Buy now, pay later is just a commoditised part of the retail environment now. There’s nothing special about it today. But when they sold, it was still very special.”
Adir: “One of the worst stories that’s ever come out of the tech scene is Mark Zuckerberg saying no to the billion-dollar offer from Yahoo. There is survivorship bias in that story of basically n equals one. Realistically, he should have sold that business for a billion dollars. The chances of that being a trillion dollars were close to zero.”
Adir on ambition: “You should look so far into the distance that it’s blurry and things start becoming just a little faded. But you should never try to look over the horizon. I think maybe there was a bit of over-the-horizon thinking by the people around this business, and that is perhaps what stopped them realising that they were at a tremendously good moment and should take advantage of it.”
