Canva, the popular design software platform, has significantly increased its subscription prices for Teams, its multi-user plan, citing new AI-powered features as the main driver. The increase has raised concerns among subscribers, particularly small businesses that may struggle with the higher costs.

The price of a five-person Teams subscription has increased from $120 per year to $500 per year for U.S. users. Canva has offered a temporary discount, lowering the cost to $300 for the first year, but this still represents a $180 increase from previous rates. This price adjustment accompanies Canva’s expansion of its product suite, including Visual Suite and Magic Studio, which incorporate advanced AI capabilities to streamline the design process.

The Visual Suite enables users to create AI-powered content like writing, slideshows, and website design, while Magic Studio provides tools for generating AI-driven social posts, videos, and presentations. These features aim to reduce the time between idea and execution, according to Canva CEO Melanie Perkins.

Despite the enhancements, the price hike has sparked mixed reactions from users, with some voicing their dissatisfaction on social media platforms like X (formerly Twitter). Concerns have been raised that the new pricing model could disproportionately impact smaller businesses that have long valued Canva’s affordable design solutions.

The company, valued at $26 billion with 185 million global monthly users, is reportedly preparing for a potential IPO. Analysts suggest that the price increases are not solely about covering the cost of new AI features but are also part of a broader strategy to strengthen revenues and attract investors ahead of a public listing.

Strategic Moves and Potential Pitfalls

Strategic Intent and Market Positioning: Canva’s decision to raise subscription prices is a calculated move to bolster revenue ahead of a potential IPO. By integrating advanced AI features like Visual Suite and Magic Studio, Canva is repositioning itself as a comprehensive, AI-powered platform aimed at businesses, moving closer to a premium offering similar to its competitor, Adobe. The price hike can be seen as a step toward capturing a more lucrative, enterprise-level market, justifying its high valuation, and appealing to investors looking for scalable, innovative tech companies.

Revenue Enhancement and Investment Appeal: The price increase directly boosts Canva’s revenue, which has grown from $1.7 billion to $2.3 billion in annualized figures. For a company nearing a public listing, strong financial performance is crucial, and higher fees help solidify that narrative. Incorporating AI, which is expensive to develop and maintain, also underscores Canva’s commitment to future-proofing its platform and differentiating itself in a crowded market. This investment in cutting-edge technology strengthens Canva’s appeal to tech-savvy users and investors keen on AI-driven companies.

User Impact and Backlash Risks: However, this strategy is not without risks. The up to 300% price hike has triggered frustration among small businesses and individual users who value Canva for its affordability and ease of use. These grassroots champions helped Canva grow through word-of-mouth, and alienating them could lead to brand damage and churn. The mixed reactions on social media highlight a critical challenge: while AI features may justify the new price for larger organizations, smaller teams and independent users may not see enough value to offset the increased cost. This could drive them to explore more affordable alternatives, potentially eroding Canva’s user base over time.

Market Perception and Competitive Dynamics: Originally celebrated as a cost-effective alternative to pricier tools like Adobe, Canva’s new pricing model shifts its positioning toward a premium tier. This opens the door for competitors to capture the market segment Canva is leaving behind—affordable, easy-to-use design tools for smaller businesses. Competitors like Adobe, with its own suite of AI tools, could attract users disenchanted with Canva’s higher costs. Additionally, emerging players offering AI-powered design at lower prices could exploit this shift, intensifying the competitive landscape.

INSIDER TAKE

Canva’s price increase is a bold move aimed at enhancing its financial profile and technological edge ahead of an IPO. However, the strategy hinges on whether the value of new AI features resonates with a broad enough audience to justify the cost. If successful, Canva could solidify its position as a leader in AI-driven design tools for businesses. If not, it risks alienating a significant portion of its loyal user base and inviting competitors to capture dissatisfied customers. As Canva navigates this transition, its ability to balance innovation with affordability will be key to maintaining its market leadership.