In Silicon Valley, the term ‘unicorn’ is used for tech startups that are valued at over 1 billion dollars, a title awarded to only a small group of only 224 companies worldwide. Australian company Canva, an online graphic design and publishing platform, has now joined their ranks, one of only two Australian companies to achieve the mythical status.
The brainchild of co-founders Melanie Perkins and Cliff Obrecht, the fast-growing company started in 2012 and has been disrupting the graphic design ecosystem ever since. The kernel of the idea came to Melanie when studying design at university. She believed that in the future, design could become very different. She felt that design should be online, collaborative and easy. Her big vision was that, “anyone should be able to design great quality content.”
Melanie is now the youngest female entrepreneur to have reached unicorn status.
Providing customers with a online platform for creating websites, presentations and graphics, the company has attracted investors and customers alike. However, a recent wave of fundraising increased the value by $40 million (AUD$50.9 million) to push the design startup’s value over the $1 billion mark.
In a recent interview with Mashable, Ms Perkins said “It’s still extremely early days for us yet, and we feel like we’ve done one percent of what we believe is possible but it’s quite exciting to get to this point in time, and it’s been a huge journey.”
According to co-founder Cliff Obrecht, that journey has also opened their eyes and dispelled many of the common myths they believed about starting a business when starting out. Back in 2015, Cliff graced the Unconvention stage to debunk myths and reveal the reality of what it actually takes to thrive in Silicon Valley.
This is unequivocally not true. Even companies like Facebook, Apple and Google took, on average, about five years to become a household name. The road is long and fraught with dangers, but determination eventually wins for founders who persevere.
For Canva, finding a way to turn their big vision into a reality was paramount. They had a small loan to get the business up and running but soon realised they couldn’t possibly tackle a global design problem with what they had. Instead they decided to be more targeted in their approach so they could quickly pick up customers and start making money to fund further growth.
Melanie and Cliff settled upon the education sector, particularly yearbook creators. Yearbooks were typically created by teachers with no design experience and no time to learn InDesign to create a professional end product.
The team launched a bootstrap business called Fusion Yearbooks, which provided teachers with an online platform they could use to easily create high quality yearbooks. To get the business up and running, they poured their startup capital into software development and produced a bare bones version of their product. They then hit the phones and called every school in Australia and using their meagre $5,000 marketing budget, sent marketing materials to each. As a result, they got 15 schools on board which turned into 80, which then turned into 160. That is where they hit their first challenge and as it turns out, one of the biggest mistakes in their business career.
They had a great Australian-based software engineering team, but to save cost they decided to shift development and outsource overseas. What they made in savings, they quickly lost in quality and timeliness. As a result, the overseas team failed to deliver on a major part of the software they had been promising clients since day one – the ability to export a design for printing. Clients needed a .pdf file to send to printers and their software could not do it.
They had 160 clients all wanting their yearbooks urgently and they had two options…they could give up or they could grind it out and persevere.
Determination eventually wins so they pushed forward by hiring a team of five or six designers (which grew to ten by the end of that year) and manually recreated every single one of those 160 yearbooks (of 100 pages each) using Adobe InDesign – the very software they were trying to disrupt.
Despite this setback, they were still able to deliver on each yearbook and eventually grew Fusion Yearbook to a point that they could use it to fund their next project Canva.
The lesson here?
Adversity in business will happen time and time again so expect it. While on the surface it might look like successful companies are born overnight, in reality what we don’t see is the years of hardwork and perseverance that came before.
Cool ideas are great, but before they can become a product or a company they need to pass two fundamental questions.
1. Does it solve a real problem?
2. Will people pay for that problem to be solved?
When it came to Canva, the problem they were solving was widespread and affected many different business sectors. Graphic design was locked behind industry standard software that was intimidating to basic users who hadn’t spent time studying design in order to use it. In the hands of a professional graphic designer, software like Adobe InDesign, was a powerful tool but for the regular person, it was almost impossible to use.
Their idea solved that problem. They would create an intuitive online software that could be learned quickly and be flexible enough to create a wide variety of products. It passed the first question.
Now they had to determine whether or not people would be willing to pay for their platform. The success of their yearbooks business, Fusion Yearbooks, highlighted that a market existed for easy to use design software. And further research highlighted that there was a myriad of similar niche industries that would benefit from a similar platform.
If you rush into raising funds before you’re ready, chances are you will end up burning through those funds quickly by spending money on things you don’t actually need. It is best to learn how to spend for your business before you look at raising investment or the funding could hurt more than it helps.
Understanding your business and understanding how to spend for your business is key. You need to spend smart when you don’t have a bulging bank account. Over time, this forces you to learn responsible spending so that when you do bring in investors, you are more likely to spend those new funds wisely.
Another big reason not to rush is that raising capital can be a time bomb. When you raise money, investors often expect you to deliver results quickly. You have to continually show that you are growing and on a clear path to profitability or your company can run the risk of dying a very fast death. Knowing the right time to raise capital is therefore a crucial step to success.
Securing investment in the early days is definitely not easy. In fact, Melanie and Cliff, built relationships for two years before they even reached the pitching phase.
They then spent three months pitching Canva and getting rejected time and time again with comments like:
“I’m not going to invest because, who cares?”
“I don’t understand your industry”
“it’s too ambitious, You can’t build it”
“What will you do with my money?”
“This must have been done before”
“I like it but it scares me”
“You are the same as XYZ startup”
“I don’t know you from a bar of soap”
“Your market is not big enough”
Rather than let these questions dishearten them, Melanie and Cliff took a growth approach to each rejection. They used these questions to gradually improve their pitch deck, making 100s of iterations to ward off investors hesitations.
This perseverance and commitment to the process meant that after months of pitching, they finally started to build traction and raised their first round of capital.
At Canva, this is not the philosophy. Cliff explains that instead he hires purely on attitude with a three key hiring criteria that he follows.
1. Resourcefulness – The first thing to look for is general smarts. You need someone who is intelligent, able to figure things out for themselves and think on their feet.
2. Hustle – You also have to look for staff to have a little hustle and grind, especially early staff when building a business.
3. Willingness to get hands dirty – An employee needs to be prepared to do the crappy work as well as the good.
If you can find someone who is smart with that hustle and grind that is also willing to get down and dirty, you have the holy trinity of an awesome employee and the rest can be taught.
As you can see, these startup myths simply do not ring true. The idea of coming up with an idea, starting a business two weeks later and being a multimillionaire within a year are false and a dangerous way for new entrepreneurs to think. Even Uber, took many years to get where they are.
Thankfully, we have voices like Cliff Obrecht to provide us with realistic advice so we can avoid the pitfalls he encountered on his journey.
Looking for more invaluable insights from entrepreneurs, like Cliff, who have walked the path before you? Pre-register for The Entrepreneurs’ Unconvention now to get access to limited 2-for-1 tickets.