Start-up Canva has become Australia's latest unicorn - a tech company with a valuation of more than US$1 billion.

The online design and publishing platform raised US$40 million in its latest funding round at a price which values the entire company at US$1b. It's a great result for Melanie Perkins, 30, who started the company just six years ago after she became frustrated with how hard it was to use other graphics programs.

But as the founders of Canva were - quite rightly - enjoying their success last week, another Australian tech company was working on the finishing touches of a deal to be acquired by US software giant Oracle.

In a cautionary tale for Australian investors and indeed for the entire Australian start-up ecosystem, construction technology business Aconex announced a few days before Christmas that it had agreed to sell to Oracle for A$1.6b. The company has been growing rapidly - revenue of A$161m in the year to June was up 30 per cent on the previous year. It is also expanding globally, with operations in over 70 countries and more than two-thirds of its revenue coming from overseas last year.


What's more, it's operating in a huge industry. Globally the construction sector is worth about US$14 trillion a year.

Yet it was Oracle who saw this potential. The US computer giant is paying 47 per cent above the Aconex share price on the day before it announced the takeover. The takeover price is also 64 per cent above the average Aconex share price in the three months before the bid. Australian investors and fund managers had hugely undervalued the stock.

In fact, Aconex was one of the most 'shorted' stocks in the Australian market last year with an astounding 10 per cent of its shares sold short.

Short selling is essentially taking a bet that a share price will fall. The way it works is that investors such as hedge funds borrow stock from shareholders and sell it and once the share price has fallen they buy the stock back more cheaply and pocket the difference.

But when a share price rises they make a loss and there will be a lot of fund managers with egg on their faces following Oracle's hefty takeover premium.

Even putting the short-sellers aside, the broader investment community failed to see the potential in Aconex. Stocks are typically valued on how much they have earned in the past year and more particularly how much they're going to earn in the next few years and hence how much dividends they're likely to be paying.

That works well for established businesses like Telstra and BHP, but for new businesses with new technology which are growing rapidly it's much more difficult to make a valuation. Despite its impressive revenue growth, Aconex made a A$10m loss in the year to June and hasn't paid a dividend. No dividend payments are a red flag to the Australian investment sector, which is built around providing retirement income via workers' superannuation accounts.

In the US, investors will be happy to buy a high-growth-but-no-profit stock in the hope that the share price will rise and they will make a profit from the capital gains. It's why many tech companies thrive in the US but less so in Australia.


And it's why Atlassian - the Australian collaboration software maker now worth US$12b - chose to list on Nasdaq and not locally. The company's founders warned investors they would be ploughing all its profits back into the company and wouldn't be paying any dividends in the foreseeable future.

Yet in the two years it has been listed in the US, the share price has nearly doubled.

Atlassian founder Mike Cannon-Brookes said the Aconex deal was "a big win for Aussie tech", but also took a swipe at the investment community. "And to local fundies who don't believe in tech, 47 per cent premium will hurt a lot?" he said in a tweet.

Aconex was founded in 2000, so it would be a stretch to describe it as a start-up, but its sale does raise questions about Australia's ability to hold on to rapidly-growing tech businesses.

Which brings up back to Canva.

Melanie Perkins has huge ambitions for her company, saying she wants to make it the most valuable tech company in the world.


Certainly until now Canva has achieved remarkable customer growth. After just eight months of existence, the platform was being used to create about 350,000 designs per month. That's impressive, but nothing like it's achieving now. After 52 months of operation, Canva's platform is now handling 34 million designs a month.

Even so, in the year to June 2017 it made a loss of US$3.3m.

The challenge for Australian investors and fund managers is which of those numbers will they focus on - the customer growth and potential or the recent financial loss?