T. Rowe Price has reduced its stake in Canva by 67.6%

Last summer, Blackbird, one of Australia’s biggest venture capital operations, wrote down one of its most prized holdings, in Sydney-based design platform Canva. Valued at $40 billion by investors in a $200 million round in fall 2021, Blackbird adjusted its own valuation of the company by 36% to $25.6 billion.

Now T. Rowe Price — the Goliath mutual fund that began aggressively investing in late-stage startups nearly a decade ago, has continued to fund them throughout the pandemic, and has led the $40 billion round in 2021 – reduced the value of its stake in Canva even more dramatically, adjusting it by 67.6%. (T. Rowe’s Blue Chip Growth Fund, which owns several classes of Canva shares but primarily Series A shares, has to date invested $99.1 million in Canva and states in its most recent prospectus, dated March 31, that it now values ​​those shares on a cost-adjusted basis at $32.1 million.)

Asked earlier today, a Canva spokesperson downplayed the figure, writing in an email: “As a profitable business with very healthy cash reserves, we are in a unique position to continue to focus on building a long-term sustainable business. Regardless of the macro environment, we are well positioned to continue doubling down on our key initiatives, including growing our team and expanding our product and AI innovation efforts.

The spokesperson added, “We are experiencing rapid and accelerated growth across all of our metrics, recently surpassing 135 million monthly active users. It would be inaccurate to determine Canva’s valuation based on a single lone investor, and with our growth and the pace of new product launches, we are confident that, regardless of market conditions, we will exceed our last valuation. as the markets correct and our growth continues.

T. Rowe’s investment in Canva represents a miniscule amount of money for the sprawling investment firm. Its Blue Chip Growth Fund had about $53 billion in assets under management at the end of the first quarter of this year, up from $63 billion a year ago in June 2022.

Yet it’s worth noting that one of America’s savviest asset managers thinks a company that was for a time the fifth most valuable startup on the planet is currently worth a lot less – essentially 13 billion dollars and not 40 billion dollars.

When asked if Canva had adjusted its own independent 409A rating to match T. Rowe’s rating — T. Rowe’s markdown is really just his opinion, after all — Canva’s spokesperson said: said his assessment did not match that of T. Rowe but declined to comment further.

Naturally, Canva is far from alone in being flatly written off by its backers after hitting new valuation heights in 2021. Stockholm-based buy-it-now-pay-later provider Klarna saw a decline even bigger a year ago, down 85% to $6.7 billion, from the $45.6 billion valuation assigned to it in 2021.

Klarna, which proactively accepted its reduced valuation, has since tightened its lending standards and cut costs, including through repeated layoffs, and says it is now “firmly on track” to achieve monthly profitability at second semester.

Like so many other companies right now, both companies are being actively transformed by – and looking to leverage – generative artificial intelligence.

In a press release late last week, Klarna attributed some of its current momentum to OpenAI, saying an integration with its big language model “accelerates Klarna’s evolution into a digital financial assistant.”

In an effort to maintain its own leadership position in the world of graphic design collaboration, Canva has also integrated generative AI into its product suite, telling Fast Company in March that much of what is now infused everywhere was built in-house through long term investment and acquisition.

Although Canva also relies in part on major big language models — it uses them piecemeal, its spokesperson says — co-founder and CEO Melanie Perkins told FC she intentionally relied less on the work of others so that you can promise users that “everything you create in Canva belongs to you.

His customers seem to like what they see. According to Canva, more than 200 million images have been generated with its image synthesis offering, more than a billion words have been written with its AI text generator, and nearly 2 billion backgrounds have been created. removed with its background removal product.

As for the impact of AI on Canva’s valuation going forward, that remains to be seen. While public shareholders will eventually decide what they think the company’s value is, an offer is not expected, not yet.

Asked about a possible IPO, Canva’s spokesperson said today that there are no plans in sight. Meanwhile, in March, Canva co-founder and COO Cliff Obrecht (who is married to Perkins) suggested to Barron’s that it was now a priority for the 11-year-old company.

“It’s not the right market to go out at the moment. But obviously it becomes inevitable at our size,” he told the outlet. “It’s on the horizon, but not on the imminent horizon.”