‘Sad and devastated’: Canva’s cuts hit its staff, and Australian tech overall

Dunja Popovs woke up on Wednesday to the news that she was one of the 22 per cent of design software maker Canva’s workers losing their job.

“Truthfully I am sad and devastated, but I’m also extremely grateful that I ever had the opportunity in the first place,” Popovs, who led a team of content designers at Canva, wrote on LinkedIn. Her plan for now is “a whole lot of gardening,” then start hunting for a new job.

Canva chief executive Melanie Perkins told staff on Wednesday that 1,271 people would be affected by a restructuring, aimed at resetting the business after growth started to slow this year.

Some will lose their jobs. Others will be asked to relocate or will find their roles rewritten. The timing was brutal: the news arrived a day after the Reserve Bank lifted rates to an 18-year-high. And anyone who has tried to get hired in tech knows not much happens between now and Australia Day.

The news took me back to April, when I saw Canva close its biggest product launch ever in a Los Angeles football stadium with engineers in gold plastic crowns playing Ode to Joy on instruments that included a rubber duck. I asked co-founder Cliff Obrecht the question every Australian tech boss was getting that month. Atlassian, WiseTech and Telstra were cutting thousands of jobs, much of it put down to AI. Was Canva next?

The answer was definitive. “We do not have to do layoffs, and we don’t have any plans to do layoffs,” Obrecht said.

Canva’s headcount growth had slowed from 50 per cent a year to under 5 per cent, and he pitched that as the grown-up alternative to what everyone else was doing. “Rather than this gas-on, hit-reverse, lay-off kind of mentality,” he said, “we’ve seen this coming, and we’ve just eased our foot off the accelerator.”

I believed him, and so did plenty of the people who got the email on Wednesday. One departing engineer described it as the “grim reaper of the tech world” arriving “a lot sooner than I thought it ever would”. Most staff were surprised, he said.

To be fair to Obrecht, I think he meant every word. Canva had been profitable for nine straight years and had more than $US1.5 billion ($2.2 billion) in the bank. It had never needed to do major layoffs.

Then the numbers turned, in large part due to the rapid rise of AI. In August, I reported that Canva had slowed that product launch because AI bills were eating its margins.

“Historically, the cost to create a design cost us essentially nothing,” Obrecht said in August. “The cost of goods to serve a user has gone from cents per month to many, many more cents.”

Canva’s internal valuation of its business, used to price staff shares, tumbled as a result, and Perkins’ email confirmed growth slowed this year for the first time in a decade.

She didn’t link the cuts directly to AI, but others are less sure the threat is temporary. Adam Barty, who runs Melbourne AI agency Revium, says it’s “pretty hard not to view AI as an existential threat to Canva’s core business model” – which is to give people who aren’t designers an easy way to make things for free, and convert enough of them into paying subscribers.

Some long-term users have moved their slideshows and social posts to AI chatbots, and barely open Canva anymore.

For a decade, Canva has been the most successful story in Australian tech: a 19-year-old in Perth and her boyfriend, more than 100 investor rejections, then the most valuable start-up this country has produced. Its co-founders are now billionaires and every pitch deck in Surry Hills borrowed a little of its shine.

This setback is grim news for staff, but also for Australia’s venture capital sector, which has effectively been propped up by Canva’s outsized success.

Venture capital firm Blackbird owns about 10 per cent of Canva, and it has been a huge success for the firm, until now. Airtree first invested in 2014 and has asked its own investors to keep its fund open until 2028 in the hope of a payday. Behind both firms sit wealthy families, endowments and super funds.

If Canva’s value keeps sliding, so does the case that backing Australian start-ups is a sound use of retirement savings.

Where things go from here is an open question – as is Canva’s very survival over the long term. An IPO looks further off than ever. A sale to a global tech giant near Canva’s current value could be an option, and would be one of the biggest software deals ever done.

But there’s always a silver lining. When Google shut its Wave project (an attempt to build a social media platform for users to collaborate) in Sydney in 2010, a crop of talented engineers went looking for something new.

One of them was Cameron Adams, who became Canva’s third co-founder.

Canva is about to release a much bigger crop, with $US10,000 grants for anyone who wants to start their own business. If even a handful of those are successful, then Australian tech’s next big story started on Wednesday.

David Swan travelled to Los Angeles in April with the support of Canva.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.