This Week in Australian Startups #61, 31st March 2024
Canva, the world’s only all-in-one visual communication platform, today announced the acquisition of Affinity, the award-winning creative software suite for professional photo editing, illustration, graphic design and page layout. The headline this week, shared in the Canva press release.
The last time I wrote about Canva was in September last year when they marked their 10th birthday. In the piece I spoke about how Canva had embarked on verticalisation with the launch of Canva Docs. This week with the acquisition of Affinity begins the horizontalisation - going upmarket to creative professionals with a real B2B design offering they can go after Enterprise with.
In their official press release, Canva wrote “While the last decade has seen rapid growth for Canva amongst the 99% of knowledge workers without design training, the integration of Affinity’s professional design software now unlocks the full spectrum of designers at every level and stage of the design journey.”
With co-founder Cliff Obrecht recently sharing that Canva won’t IPO before 2025/2026 it means they had time to fill the gaps before completing their offering, and that’s exactly what they have done. For most analysts the one business Canva still had to be concerned about was Adobe. Whilst they don’t provide hard numbers, it was estimated Adobe has 12 million subscribers for its Creative Cloud and 50 million for its online community Behance.
But more importantly Adobe’s stronghold of the creative professional market, B2B and Enterprise market. A gap Canva has been trying to actively close having been PLG for most of its life, only more recently building out an Enterprise Sales team.
Ray Wang, founder and principal analyst at Constellation Research said in a TechCrunch article:
With Affinity, the company can also better compete with Adobe, particularly Adobe Express. “Canva needed products with more complex capabilities to go up against Adobe,” Wang told TechCrunch. ”Their basic offering wasn’t as robust as Adobe Express. Affinity has a really easy-to-use photo editor. The page layout is also very easy to use,” he said. What’s more, he said that the two company cultures are well aligned.
TechCrunch also confirmed the deal has been reported at ~$380M USD. Making it Canva’s biggest acquisition both by amount and employee headcount. It’s a smart piece of business indeed that I believe will in time look to be one of the best acquisitions for the overall value it will provide to Canva - perhaps even sooner when Canva IPOs, with a now significantly bigger TAM.
Timing is always key, and it’s unfortunate timing for Adobe - recently they’ve been under investigation from the FTC for making their subscriptions too difficult to cancel. Since then Adobe stock has been down, and things continue to look tough as it takes further hits after OpenAI introduced text-to-video tool Sora challenging some of its tools directly.
Adobe had been on the front foot in expansion mode with the now cancelled Figma acquisition, also resulting in a $1B USD termination fee. XD, Adobe’s closest product to Figma was put on pause during the acquisition and now that it’s been cancelled for good means there is a gap in its offering. On the back foot now, Canva is capitalising taking the game straight to them.
Affinity in many ways is the anti-Adobe, as it has not offered a subscription product instead opting for a more consumer friendly one time payment, with upgrades at a reduced price.
There are some questions that have arisen around how Canva will integrate Affinity as a business, many of which have been answered through both companies making statements.
On pricing Affinity CEO Ashley Hewson shared; “If we do offer a subscription, it will only ever be as an option alongside the perpetual model, for those who prefer it. This fits with enabling Canva users to start adopting Affinity. It could also allow us to offer Affinity users a way to scale their workflows using Canva as a platform to share and collaborate on their Affinity assets, if they choose to.”
I’d expect no changes in the short term. But eventually what it will likely look is an Affinity ‘Pro’ or ‘Cloud’ version that deeply and natively integrates with the Canva suite of tools, offered with a subscription model. It may also result in the eventual halt of development, or second class citizenry of its non subscription product - something we’ve seen with other acquisitions of this nature in tech. In the same statement, Ashley Hewson goes on to talk about what some likely integrations will look like;
“Yes, it’s likely there will be some integration between Affinity and Canva in the future, particularly in consideration of the workflows of enterprise customers. Creative and brand management teams need professional tools to create and edit assets, images, icons, logos and other elements - and Affinity apps are the perfect choice for that.
For Canva users the integration plans shared by co-founder Cameron Adams “there are already ideas for lightweight integration into the more professional design services of Affinity. As their initial non-designer customer base matures, they will expect more powerful tools, and Affinity will help deter some Adobe converts.”
Being able to quickly sync those assets to Canva for the wider organisation to easily use within their documents, presentations, whiteboards and other visual communication materials would make a lot of sense.”
In an effort to ease these sorts of questions, particularly from the loyal customer base of Affinity, the pair of companies have made four pledges to the community you can read about here.
This acquisition is all about growing and accelerating firstly Canva’s TAM and secondly their ARPU. With no shadow of a doubt it gives them a definitively competitive product to Adobe’s Creative Could they can go after the creative professionals and Enterprise market with. “...investing in strategies that enhance our B2B offerings is core to the future of our business," said Canva co-founder Cliff Obrecht in their press release.
And an Easter egg for those of you who have made it this far..
When the Figma acquisition by Adobe was cancelled in September 2022 Affinity shared the following tweet:
Fast forward to this week and that tone has changed “I am thrilled to announce that Affinity is joining the Canva family. In Canva, we’ve found a kindred spirit who can help us take Affinity to new levels.”
Either way if Adobe isn’t concerned, they certainly should be. This acquisition is great piece of business for Canva and its investors, and sets up the foundation for as Canva’s steps up its ambitions of building Canva for the enterprise - maximising value ahead of an expected IPO in 2025/2026.
Australia
Top News
Mike Cannon-Brookes Backs $1B Government Initiative to Establish Solar Manufacturing in Former Coal Mining Area (Startup Daily)
Blackbird reveals the full lineup for Sunrise Australia (Startup Daily)
Square Peg touts billion-dollar returns as it hits up market for $843M in 6th fund (AFR)
NextGen Ventures releases the Student Startup Funding Report '23 (NextGen Ventures)
Women founders received only 3.9% of all student startup funding over past decade (SmartCompany)
Kiki officially gets back into subletting, but the “girls only” group is staying (SmartCompany)
Leadership shakeup at Finder: Australian CEO exits in recent layoffs (SmartCompany)
Queensland awards $5.5 million in grants to boost SME innovation (SmartCompany)
Fintech Yondr Money acquires nano-gifting app Shouta (BNA)
Former unicorn Tritium ordered to delist from Nasdaq as shares flounder (BNA)
Break or breakthrough: the red flags at Victoria’s VC fund (AFR)
Blackbird slashes valuations of top Aussie start-ups (AFR)
CSIRO backs its long-term VC bet despite nil returns (AFR)
Facebook Australia News Feed to shut down in the first week of April (AFR)
How Sydney’s Houden family turned Task Group into $100M fortune (AFR)
Pay rises stall for tech workers (AFR)
Booktopia vows to do anything to stay afloat (AFR)
Westpac says it’s very confident of a $3bn tech revamp by end of 2027 (The Australian)
Telstra Ventures backs company aimed at shattering Amazon’s last mile delivery business (The Australian)
Airwallex CEO dismisses blockchain as ASIC launches crackdown (The Australian)
Canva has designs on the pros following its largest ever acquisition (The Age)
Incubator Cicada launches new health tech hub (Capital Brief)
CBA invests in UK regtech startup GSS (Capital Brief)
VC syndicate TEN13 appoints new partners, eyes ‘picks and shovels’ AI deals (Capital Brief)
$20M venture capital fund launched by the Northern Territory government and the Paspalis Corporation to support local innovation (InnovationAus)
First AUKUS innovation challenge launches (InnovationAus)
WA Government Announces Latest Recipients Of Innovation Booster Grant (Startup News)
Airtree releases its 2024 edition of Australian tech companies valued at $100M+ (Airtree)
HEX’s high school programs are now ATAR accredited in South Australia and the Northern Territory (Chris Hoffman)
Funding Rounds
Forever Network, the sports social media platform, has raised a $6M Series A to accelerate US expansion (Startup Daily | LinkedIn)
Femtek, the first menstrual health focused smart ring built to elevate women's lives and provide them with a new level of cycle literacy, has raised $1M led by Arcanys Ventures and Techstars (SmartCompany)
Illuvium, an NFT-based video game maker, has raised $18.4M from crypto investors King River Capital, Arrington Capital and Amimoca Brands (Capital Brief)
Around The World
Top News
FTX to Sell Two-Thirds of Anthropic Stake for $884 Million (WSJ)
Adam Neumann Bids to Buy Back WeWork for More Than $500 Million (WSJ)
Trump's Truth Social platform soars in second day of trading on Nasdaq (CBS)
Stability AI CEO resigns because you’re ‘not going to beat centralized AI with more centralized AI’ (TechCrunch)
Ripple CEO Garlinghouse Says SEC to Seek $2 Billion in XRP Crypto Token Case (Bloomberg)
Facebook snooped on users’ Snapchat traffic in secret project, documents reveal (TechCrunch)
Marissa Mayer’s startup, Sunshine, just rolled out photo sharing and event planning apps, and the internet isn’t sure what to think (TechCrunch)
OpenAI shows off first examples of third-party creators using Sora (VentureBeat)
“The king is dead”—Claude 3 surpasses GPT-4 on Chatbot Arena for the first time (Ars Technica)
LinkedIn is experimenting with a TikTok-like video feed in its app (TechCrunch)
Sam Bankman-Fried gets 25 years in prison for fraud and money laundering at FTX, ordered to pay $11B in forfeiture (TechCrunch)
Microsoft and OpenAI Plot $100 Billion Stargate AI Supercomputer (The Information)
Meet Uzbekistan’s first unicorn: e-commerce startup Uzum (TechCrunch)
Funding Rounds
FundGuard secures $100 million Series C for AI-powered investment platform (CTech)
Benchmark to Lead Investment in AI Video Startup HeyGen at $440 Million Valuation (The Information)
Avenzo Therapeutics Announces $150 Million Oversubscribed Financing To Advance Emerging Oncology Pipeline (Business Wire)
PayPal backs Indonesian insurance startup Qoala in $47M funding (TechCrunch)
Amazon spends $2.75 billion on AI startup Anthropic in its largest venture investment yet (CNBC)