T. Rowe Price Adapts Investment Strategy: Marks Down Canva Stake by 67.6%

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Amidst the dynamic landscape of venture investments, the value of Canva, the Sydney-based design platform, has experienced significant markdowns. Last summer, Blackbird, one of Australia's largest venture operations, adjusted Canva's valuation by 36% from $40 billion to $25.6 billion. Now, T. Rowe Price, a mutual fund heavyweight known for its aggressive investment strategies, has taken an even more substantial markdown, reducing the value of its stake in Canva by a striking 67.6%.

As the leading investor in Canva's $40 billion funding round in 2021, T. Rowe Price's adjustment reflects a revised evaluation of the company. Their Blue Chip Growth Fund, which primarily holds Series A shares in Canva, has invested $99.1 million to date and now values those shares at $32.1 million on a cost-adjusted basis, according to their most recent prospectus.

When asked about the significant markdown, a spokesperson for Canva downplayed the impact, emphasizing the company's profitability and healthy cash reserves. They reaffirmed Canva's focus on long-term growth and expressed confidence in their ability to double down on key initiatives, expand their team, and continue innovating their product and AI capabilities. The spokesperson highlighted Canva's rapid and accelerating growth, with over 135 million monthly active users, and emphasized that the valuation should not be determined based solely on one investor's opinion.

While T. Rowe Price's investment in Canva represents a relatively small portion of its extensive portfolio, the markdown by such a well-regarded asset manager is noteworthy. This adjustment implies that the company's value is currently estimated to be around $13 billion rather than the previous $40 billion.

Canva is not alone in experiencing markdowns after reaching new valuation heights in 2021. Other companies, such as Klarna, the Stockholm-based buy-now-pay-later provider, have also faced significant downward adjustments. Klarna's valuation dropped 85% to $6.7 billion from the $45.6 billion assigned in 2021. Klarna has since implemented measures to improve profitability, including tightened lending standards and cost reductions.

Both Canva and Klarna are actively leveraging generative artificial intelligence (AI) to transform their businesses. Canva has integrated generative AI throughout its product suite, focusing on in-house development and acquisitions to enhance user experience. Canva's spokesperson noted their reliance on large language models but stressed their commitment to ensuring user ownership of creations.

While the impact of AI on Canva's valuation remains to be seen, the company continues to enjoy strong customer satisfaction. Canva reports impressive numbers, including the generation of over 200 million images through its text-to-image offering, the creation of more than 1 billion words with its AI text generator, and the removal of nearly 2 billion backgrounds using its background remover product.

Although the public market will eventually determine Canva's worth, an IPO is not currently on the horizon. While co-founder and COO Cliff Obrecht mentioned the inevitability of going public, he stated that the timing isn't right, and an IPO is not imminent for the 11-year-old company.

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