The AI design giant Canva just announced the first-ever major round of layoffs in its 13-year history. As part of the restructuring, 1,271 people—around 22% of the company’s overall staff—will either be laid off, reassigned to new roles, or relocated to the company’s headquarters in Sydney, Australia. 

News of the layoffs was announced on November 3 (a perfect day to bury some bad news) in a press release from Canva cofounder and CEO Melanie Perkins. In the note, Perkins explains that the layoffs are part of a larger plan to make Canva’s teams more agile and less siloed, including by folding product, growth, and platform teams into one unit and reducing the number of “subspecialities” at the company.

“I’ve come to the difficult conclusion that small changes won’t be enough,” Perkins’ letter reads. “To set ourselves up for the next decade, we need to refound Canva, getting back to our roots of small, empowered teams with the freedom to make decisions, take ownership, and focus on what matters most for our community.”

While Canva didn’t provide a broader business reason for the layoffs, the restructuring comes at a time when it’s working through some mounting growing pains and questions about the timing of a potential initial public offering (IPO). After spending the last several years going all in on its AI-powered product suite, Canva is now facing the challenge of squaring its business model with an increasingly voracious user base.

Canva’s growth conundrum

In May, Fast Company wrote that design was entering its “frenemies” era. 

At the time, Anthropic had just launched Claude Design. The product seemingly came as a surprise to incumbent companies including Adobe and Figma, which had been operating under a multiyear collaboration with Anthropic to integrate Claude into their products, and didn’t expect the AI giant to debut its own design competitor. Meanwhile, Canva told Fast Company that it had actually helped Anthropic develop Claude Design, despite Canva’s own collaboration deal with the company. 

For Adobe, Figma, and Canva, working with frontier models offers the advantage of bringing new tools to market faster and benefiting from the sophistication of frontier models. The main downside is that using these frontier models also takes a lot of computing power, and that racks up major costs. As Canva has made a major push—by building its own models and acquiring AI companies—to become an “AI platform” over the last several years, those costs have become a significant problem.