Canva to buy AI startup in year’s second deal to catch Adobe

The deal, which took about a month to finalise, lets Canva integrate the smaller firm’s video and image generation models into its own products. It’s the quickest acquisition yet for Canva, co-founder Cameron Adams told Bloomberg News. It closed just months after Australia’s biggest startup took over the Affinity suite of software popular with Apple Inc. Mac users, in a deal worth several hundred million pounds. Canva didn’t specify a valuation for Leonardo.ai, and Adams declined to elaborate.

Canva, which raised funds at a $26 billion valuation this year, is one of several fast-rising creative software developers chasing market leader Adobe. CapCut, a video-editing app from TikTok-owner ByteDance, is also gaining users at a rapid clip.

In Canva’s latest deal, it gains a 120-person team at Leonardo.ai that works on software to help users generate and edit images online with text prompts. Founded in 2022, the startup is backed by Canva-investor Blackbird Ventures and raised $31 million last year. People have used its platform to create more than a billion images over the past 18 months, Canva said.

Leonardo.ai’s services join Canva’s growing suite of AI tools, which it hopes will lure away some of Adobe’s biggest enterprise customers and accelerate revenue growth.

Founded about a decade ago by Adams, Cliff Obrecht and Melanie Perkins, Canva has grown as a competitor to Adobe, the longtime dominant provider of software for graphics professionals. Adobe has added AI features throughout its products recently, but its shares have fallen more than 10% this year after a $20 billion deal to acquire Figma fell through in December.

Investors have long viewed Canva as a candidate to go public, though the company hasn’t discussed concrete plans for doing so. It recently completed a $2.5 billion secondary share sale, co-founder and Chief Operating Officer Obrecht said in an earlier interview.

The Australian upstart has now announced the acquisitions of eight companies, including Affinity, visual AI startup Kaleido.ai and image providers Pexels and Pixabay.

“Generative AI can’t be a one-trick pony,” said Adams, who is also Canva’s chief product officer. “We’re entering a whole new world of being able to change and adapt the output generative AI is giving you.”