Canva’s now worth $40 billion. The next step? Getting users to pay.
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The Big Story
Design for all
Canva's new $200 million funding round propelled its valuation up to $40 billion, an incredible leap that, at least on paper, makes the design software provider more valuable than other private upstarts like Databricks and SenseTime.
But Canva stands out in another way: The bulk of its customers aren't paying for the product — and probably never will. But now, the company is making a big push into the enterprise and looking for subscribers willing to fork over actual cash.
- Since Canva launched its official enterprise product in 2019, there's been a "300% growth in the number of teams using it," co-founder and Chief Product Officer Cameron Adams told Protocol.
- "We always expect free [users] to be the bulk of our customer base," he said. But "particularly in the enterprise collaboration space, there's still a huge opportunity to look at the entire content creation experience and bring it down into something that you can do super simply," Adams added.
Canva gained prominence by offering design templates that small businesses and individuals could use to create professional content like business cards, flyers or presentations. But to capture more enterprise business, it has expanded the product suite.
- It launched a video editing tool in 2019. Customers now produce over 20 million videos every month using Canva, per Adams.
- And the company will soon introduce a new application allowing users to more easily build web pages.
- "It literally lets you create a website in under 10 minutes, come up with a domain name, buy that domain name and have it displayed for users," said Adams.
So-called "freemium" strategies in the world of software aren't new. And many vendors have a large user base that can use the product regularly without having to pay.
- For example, Autodesk, a company that pulled in $3.7 billion in revenue last fiscal year, has roughly 5.3 million paid subscribers and nearly 15 million "non-compliant" users, according to the company.
- But Autodesk launched in 1982 and has since firmly established itself as an industry-leading product for design.
- Canva has been around eight years and, despite what executives claim is "incredible" growth each year, it still has a long way to go to penetrate a market that is dominated by much larger rivals like Adobe and seeing new competition from other upstarts like Figma.
- Instead, the company sees itself as building a new category called "visual economy."
- It's also targeting non-professional designers, an increasing focus for Adobe and others as well. Adams didn't rule out eventually building products for that audience, but said it's not "our primary focus."
- "We're bringing design and visual communication to the enterprise. And people are using it in ways that they didn't do before," he said. "It's creating new opportunities that they weren't aware they could use design for before."
Canva believes it has a massive market opportunity ahead. Whether it is worth "hundreds of billions of dollars," as Adams estimated, remains to be seen. (For reference, the artificial intelligence market, which is much larger, is only expected to reach $360 billion by 2028.)
- The company claims it's been cash-flow positive for the past four years. And Canva is on track to surpass $1 billion in annualized revenue by the end of 2021, Perkins told Bloomberg.
- Its path to growth resembles that of successful software companies like Atlassian: Start with the end user and work up the enterprise food chain.
Adams thinks Canva's collaboration features help it stand out, as well as its ability to help enterprises control their "brand identity" while democratizing access to design.
- "We're talking on the scale of thousands of people using Canva at one place, helping them connect and share their content with one another," he said.
- But nearly every software vendor is trying to infuse similar capabilities into their product suite, raising questions about how enterprises will break out of these collaboration silos.
- "We've seen organizations where they've been all onboard with Canva, everyone from the ops teams, through the marketing team, through the sales team, through the business development team," said Adams. But "they will obviously use that with a bunch of different tools."
While it appears Canva has had early success bolstering its subscription business, convincing free users to begin paying for services is a difficult task — just ask Docker.
- That effort is particularly more difficult given Canva's promise that it won't start charging for services that are already free.
- "Turning a free feature into a private paid feature doesn't do that customers any justice," said Adams. "It's definitely not part of our philosophy."
- There seems to be recognition, however, that the "freemium" model is a lucrative strategy in the design space.
- For example, Adobe's competing product Spark, which uses a similar template approach as Canva, also offers a non-paid version.
Now, Canva just has to continue to prove that its software is worth the investment. Going increasingly head-to-head with Adobe, one of the world's most successful tech vendors, will be tough.
- But given the now-frequent user backlash against Adobe and its pricing model, Canva might just be able to convince the world that there's life beyond Photoshop.
— Joe Williams
A MESSAGE FROM HERE TECHNOLOGIES
We are on the verge of seeing a massive increase in location-relevant data, well beyond anything today, and driven by an expanding network of sensor-equipped vehicles, devices and machines. But we are moving into a more dynamic world where all objects and things need to understand where they are and how to precisely interact with their surroundings. It is the beginning of a new era of Spatial Intelligence.
This Week On Protocol
Protecting the mines: More than 65 million software developers use GitHub. Protocol's Tom Krazit talked to COO Erica Brescia about how she keeps the universe running smoothly.
Around the Enterprise
- GitLab's revenue jumped to $152 million last fiscal year while losses grew to $189 million, up from $130 million a year ago, per its IPO filing. Its net retention rate, however, is an impressive 152%.
- It's all about workflows in enterprise tech. The buzzword was pouring out the mouths of executives during the latest round of earnings calls, according to an analysis from ZDNet.
- Google is leading a new charge among the Big Three cloud vendors in courting media companies, according to Digiday.
A MESSAGE FROM HERE TECHNOLOGIES
Businesses, cities and government agencies will continue to generate vast amounts of location data. Moving through the next decade, location data can help underpin major transformational shifts in how our economies and societies are examined. It can be harnessed to help solve some of our world's most pressing inequity challenges and transform the way we live, move and interact within our communities.
Thanks for reading — see you Thursday!