Adobe's Figma deal raises big questions about its M&A whack-a-mole strategy in response to free alternatives; the deal is 50x Figma's reported 2022 ARR of $400M

Bryce Elder / Financial Times : Tweets: @amaldorai , @workmj , @bitech , @ohmdee , and @hkanji Tweets: Amal Dorai / @amaldorai : I'm not surprised that Adobe is acquiring Figma for $20B, nor that Wall Street doesn't understand it and $ADBE stock is down more than $20B today. It's a smart move for Adobe because it's nearly impossible to make legacy software applications multi-user collaborative. Thread: 🧵 Michael Jackson / @workmj : “The $20B cost (half cash, half stock) is...50 times Figma's reported $400M of 2022 annual recurring revenue (ARR) and it values Figma employees at about $25M each.” Some interesting bits of data in a typically grumpy FT article. https://www.ft.com/... @bitech : Adobe's product chief explains why it made a $20 billion bid for Figma, which he says has become a ‘single source of truth’ in design https://www.businessinsider.com/ ... @ohmdee : “Turning Creative Cloud into a free-to-play product would be very messy for a company used to $7-8bn in annual free cash flow. However, without a radically different pricing approach, Adobe's competition problems will persist, & leave it with M&A whack-a-mole as its main defence” https://twitter.com/... Hussein Kanji / @hkanji : Between 2015 and 2016 the big-five US tech companies (Microsoft, Apple, Amazon, Google and Facebook) bought 175 companies and shut down most of them https://t.co/wBBXLpZ9JD

Financial Times 2022-09-16 Bryce Elder

Context & Ripple Effects

Adobe’s bid puts its weak internal alternative in relief: related coverage says XD generated only $15M in annual revenue after seven years, while Figma was positioned as a way to rethink design software for the cloud era. Adobe’s cloud-era design-tool rationale makes the premium less about current revenue than access to a collaborative product Adobe had not built itself.

The valuation debate is sharpened by coverage that described Figma’s reported $400M ARR as continuing to double and creating pricing pressure on Adobe. Figma’s growth and pricing pressure supply the operating case behind a multiple that looks extreme on ARR alone.

First-order effects

Adobe shifts its design-tool strategy from trying to scale XD to acquiring Figma, making retention of Figma’s product momentum and team central to the deal’s value.
Adobe shareholders immediately bear the burden of a $20B price that equates to roughly 50 times Figma’s reported 2022 ARR, rather than valuing the transaction on mature-software revenue metrics.

Second-order effects

Figma’s growth and the availability of free alternatives tighten pricing pressure on Adobe’s design products, limiting the room to treat the acquisition as a simple add-on to its existing suite.
The unusually large Figma retention package raises the cost of preserving the talent that built the collaborative product, extending the deal’s economic commitment beyond the purchase price.

Third-order effects

The later regulatory stall described in the coverage shows that Adobe’s acquisition-led answer to a cloud-native challenger faces execution risk outside product integration, while Adobe has also shifted attention to AI.
If cloud collaboration continues to outpace incumbent-built alternatives, large creative-software vendors will be pushed toward buying product adoption and talent rather than relying solely on internal catch-up efforts.

The trend: Adobe’s Figma bid is part of a broader acquisition-led response by incumbents seeking cloud-native collaboration and growth when internal products lag challengers.

Discussion

@amaldorai Amal Dorai on x
I'm not surprised that Adobe is acquiring Figma for $20B, nor that Wall Street doesn't understand it and $ADBE stock is down more than $20B today. It's a smart move for Adobe because it's nearly impossible to make legacy software applications multi-user collaborative. Thread: 🧵
@workmj Michael Jackson on x
“The $20B cost (half cash, half stock) is...50 times Figma's reported $400M of 2022 annual recurring revenue (ARR) and it values Figma employees at about $25M each.” Some interesting bits of data in a typically grumpy FT article. https://www.ft.com/...
@ohmdee @ohmdee on x
“Turning Creative Cloud into a free-to-play product would be very messy for a company used to $7-8bn in annual free cash flow. However, without a radically different pricing approach, Adobe's competition problems will persist, & leave it with M&A whack-a-mole as its main defence”…
@hkanji Hussein Kanji on x
Between 2015 and 2016 the big-five US tech companies (Microsoft, Apple, Amazon, Google and Facebook) bought 175 companies and shut down most of them https://t.co/wBBXLpZ9JD
@bitech @bitech on x
Adobe's product chief explains why it made a $20 billion bid for Figma, which he says has become a ‘single source of truth’ in design https://www.businessinsider.com/ ...
@zoink Dylan Field on x
THREAD: This morning we're announcing that @Figma has entered into an agreement to be acquired by @Adobe ! More information here: https://figma.com/... (1/9)
@kateconger Kate Conger on x
how it started / how it's going https://twitter.com/...
@levie Aaron Levie on x
Figma is now $20B proof that if people say “that market has already been solved”, then they're probably wrong.
@nbashaw Nathan Baschez on x
Figma will be Adobe's Instagram
@joshm Josh Miller on x
The tech industry is generally lacking CEOs who are fantastic role models. I'm most happy for the @figma acquisition because it means the next generation of founders will look at @zoink and conclude: “I can be a kind, humble, generous human and still win” 💙💙💙
@rolfewinkler Rolfe Winkler on x
What investors first paid for @Figma, which @adobe buying for ~$40.20 per share: $0.088: @dannyrimer/@IndexVentures, @semil, Jacobsen/OATV A $0.199: @johnolilly/@GreylockVC B $0.332: @mamoonha/@kleinerperkins C $1.098: @andrew__reed/@sequoia D $4.619: Peter Levine/@a16z
@anthony Anthony DeRosa on x
Four years ago, Dylan Field was living in a one-bedroom apartment in San Francisco's gritty Mission District, where he would stop for a $1 cup of coffee on his way to work. Yesterday, he sold his company for $20 billion https://www.wsj.com/... via @WSJ
@litcapital @litcapital on x
Capitalism 101 https://twitter.com/...
@semil @semil on x
YouTube : Google Instagram : Facebook Figma : Adobe
@juanbuis Juan on x
figma: we are the fun, independent way to design :) adobe: what about $20,000,000,000 figma: ok fine
@kwharrison13 Kyle Harrison on x
As fascinating as the news of Figma + Adobe is? Also fascinating to see @penpotapp (open source Figma) top Hacker News. Platform risk is a real thing. https://news.ycombinator.com/ https://twitter.com/...
@gergelyorosz Gergely Orosz on x
2021 was the year when startups raising money did it on valuations that have almost all collapsed by now. Figma raised at a ~$10B valuation then. The fact that they are selling to Adobe for close to double is nothing short of remarkable (also shows Adobe desperately needs Figma) …
@tomwarren Tom Warren on x
big news, Adobe will reportedly acquire Figma in a deal worth around $20 billion. Figma is used widely inside Microsoft by thousands of designers and developers, and has been competing heavily with Adobe XD in recent years https://www.theverge.com/... https://twitter.com/...
@adobe @adobe on x
We're excited to share our intent to acquire @Figma. Together, we will usher in a new era of collaborative creativity. Key info: https://www.adobe.com/... https://twitter.com/...
@johnolilly John Lilly on x
I am beyond proud of the Figma team for what they've done and what's to come. But also for the way they've done it, and will continue to do it, with care and generosity and joy. I'm full of admiration for @zoink and the team, and excited for what's ahead. https://greylock.com/...
@greylockvc @greylockvc on x
1/ Achievement unlocked: multiplayer design. Congrats to @Figma and @Adobe on an incredible new chapter together. @GreylockVC venture partner @johnolilly shares his reflections on partnering with Figma, starting at series A in 2014: https://greylock.com/...
@katie_roof Katie Roof on x
For close to $20n, largest takeover of a private software company ever. 🍨 https://twitter.com/...
@lkanies Luke Kanies on x
This #figma acquisition is exactly the kind of thing the @FTC should be stopping. Dogma has been the first real challenge to adobe in decades. This is worse for everyone's customers
@scottw_grizzle Scott Willis on x
$ADBE down 8% pre-mkt on news it's buying Figma is like $META being down 8% after buying Instagram A huge win long term and a buying opportunity.
@ravisutanjani @ravisutanjani on x
Breaking - Adobe is buying online design startup Figma in a deal valued at about $20 Billion 📈🚀 That would be the biggest ever takeover of a private software company. If we recall WhatsApp buyout by Meta was valued at $19 Billion.
@charlespattson Charles Patterson on x
Who did this!? 😂 https://twitter.com/...
@ajmedick Alex Medick on x
Meta tries to acquire a co: monopolistic giants Adobe acquires another competitor: good business Makes no sense.
@balamobi @balamobi on x
@Ravisutanjani LinkedIn was acquired at $26 B!(when you compare WhatsApp with Figma)
@kateclarktweets Kate Clark on x
LinkedIn's Jeff Weiner invested in Figma's seed round in 2013. His 2.2% stake is worth $440 million today. https://www.theinformation.com/ ...
@kateclarktweets Kate Clark on x
Figma's $20 billion sale—the largest deal for a private tech company at the time of the announcement—is delivering MASSIVE returns to several VC firms. Index: $2.6 billion Greylock: $2.6 billion Kleiner: $2.1 billion Sequoia: $1.2 billion and more https://www.theinformation.com/ …
@reidhoffman Reid Hoffman on x
Amazing work by @zoink, @figma and team, my partner @johnolilly. It's such an honor to work with these amazing folks. And the journey continues, including of course, with @dwadhwani. https://greylock.com/...
@jenniferdaniel Jennifer Daniel on x
Apropos of absolutely nothing ... What are some good examples of a company that was acquired by a bigger one and the acquired company meaningfully changed the bigger company's culture and priorities? You know, instead of just getting absorbed into the Borg.
@darkviperau @darkviperau on x
Hard to have competition in markets when entities are large enough that they can buy anyone they wish for the coins they have in their couch cushions. Success is a race to see who can sell themselves fastest to the few dozen entities that own everything. https://twitter.com/...
@purplemikey Mikaël Dufresne on x
Meta wants to buy Supernatural. A small indie studio doing a niche VR game. People go crazy about it... Adobe keeps buying every single design software that exist... People don't care. They want to be angry at Mighty Zuck. Not scary Adobe. 🥱
@timsweeneyepic Tim Sweeney on x
@zoink ... Feels like Apple “acquiring” Next. The merger agreement says one thing, but who's really wearing the pants here?
@peteskomoroch Pete Skomoroch on x
Dylan was my intern in 2010, we kept in touch as friends, and years later I was able to invest in @figma's seed and series A rounds. After a decade of tireless work by the Figma team, today the result is the largest acquisition of a private tech company. Congrats @zoink & team! h…
@shpigford Josh Pigford on x
Everybody acting like they'd turn down $20,000,000,000.
@tanayj Tanay Jaipuria on x
Adobe's acquisition of Figma is one of the largest acquisitions in software. 1. Dell buying EMC for $67B 2. IBM buying Red Hat for $34B 3. Salesforce buying Slack for $27B 4. Microsoft buying LinkedIn for $26B 5. Meta buying WhatsApp for $22B 6. Adobe buying Figma for $20B
@ericajoy Erica Joy on x
tis the (financial) season. https://twitter.com/...
@cynthialive Cynthia Johnson on x
Nice work @Adobe ! https://techcrunch.com/...
@sbisson Simon Bisson on x
A logical exit for Figma, but oh boy, the design community is not going to be happy. https://twitter.com/...
@kenneynl @kenneynl on x
Remember to support independent software developers and/or open source software to stop this from happening. https://twitter.com/...
@leyeconnect @leyeconnect on x
In context cracked Figma app will become a thing.
@jaminball Jamin Ball on x
Congrats to @figma! Amazing outcome for one of the best software companies out there. This is stale, but I wrote a bit about what makes them so special in early 2021: https://cloudedjudgement.substack.com/ ...
@notdetails Joel Califa on x
Lots of FUD around the Figma acquisition. Very similar to the reaction when Microsoft acquired GitHub—clippy memes and all. Just a reminder that that turned out fine and even led to some great innovation. Adobe needs to respond by building trust. Hope they do.
@gk3 George Kedenburg III on x
real take: i'm sure the extra resources will make figma a lot better in the short term long term, who knows? it might slowly degrade to be another adobe product that we all just put up with because its good enough or it might just be the injection of new perspectives adobe needs
@tomwarren Tom Warren on x
I love Adobe apps and I use them every day, but damn the Adobe CC app is like malware on Windows. It spawns so many processes and fills up the task scheduler and is generally annoying DRM. I hope Figma can drag Adobe into the 21st century 🙏
@mrdoob @mrdoob on x
I hope this is the last back stabbing designers need to really start caring about open source options.
@stammy @stammy on x
the part of the $20B @figma acquisition that i'm most excited for is that it will accelerate @zoink's personal angel investing. dylan has a knack for identifying & supporting founders and startups. he's in so many deals. this couldn't have happened to a nicer guy
@cartunenetwerk Tune on x
I'm weak at Adobe buying Figma. Whole business models and exits be to just annoy big bruh until they gotta deal with you.
@balajis Balaji Srinivasan on x
The Thiel Fellowship was attacked. Denounced. Vilified. Yet it somehow found the founders of Ethereum, Figma, and more. It proved its point. Some don't need college. Now, the fellowship's cofounder tells you just how they proved the establishment wrong. https://marginalrevolution…
@rubenharris Ruben Harris on x
Figma is only 10 years old. $20 billion exit. Start thinking in decades. The days are long, but the decades are short. Also, @zoink is a Thiel Fellow (college dropout). Skills > Degrees. https://twitter.com/...
@rga @rga on x
“How do I make sense of this? I'm confused.” — me reacting to the news that Adobe paid $20 billion for Figma. Also me opening a Figma file.
@hyumankind Hyam on x
Adobe is so threatened by @Figma, it was a losing game for them. Acquisitions are where good things go to die. Grand sad. https://twitter.com/...
@gergelyorosz Gergely Orosz on x
Figma sold for how much Cloudflare is worth on the public market today ($20B). Cloudflare! Financially, this is an incredible feat and huge success for the team. And Figma is a for-profit business. Well, they made their profit.
@nikitabier Nikita Bier on x
I know everyone is upset about the Figma acquisition. But just think about how many jets the VCs can buy now.
@jevon @jevon on x
They spent almost 4 years building Figma before releasing it. It's like the opposite of everything every startup is taught.
@gergelyorosz Gergely Orosz on x
For those saying they are disappointed that Figma sold for ~$20B vs waiting to go public. Public companies worth less than this: - Box $3.8B - Dropbox $8B - Etsy $14B - Twilio $14B - Pinterest $16B - Coinbase $17B - Expedia $17B - Snap: $19.4B - Spotify $19.6B I say good choice. …
@ricmac Richard MacManus on x
There's a disturbance in the web standards force. The creator of @threejs doesn't approve of Figma's decision... https://twitter.com/...
@mrdoob @mrdoob on x
Sell out https://twitter.com/...
@mamoonha Mamoon Hamid on x
Congratulations @figma and @zoink on the largest acquisition of a private tech company ever. @kleinerperkins couldn't be more proud of the team + look forward to what you all accomplish as part of the @Adobe family.
@uxwendy Wendy Johansson on x
I'm very excited to hear the Figma acquisition news this morning! Startup employees often get a windfall 💰 when big moves like this happen. In the coming years (hold for those long-term gains taxes, Figma employees!), we should see two design-focused impacts coming from this 🧵 ht…
@leeloowrites @leeloowrites on x
If you're missing how Figma helped level the playing field for designers around the world, then your mindset is not as inclusive as you think it is. It may not change immediately, but you don't spend 20b to keep a product free and open.
@katie_roof Katie Roof on x
Many tech companies could only dream of selling for last year's valuation right now. Figma sold for double https://twitter.com/...
@alurdesign Jakub on x
🧵 I post pretty rarely nowadays but I am just so *disappointed* by this. I've been a loyal Figma user for the past few years and all of the designs on my profile were made using this tool. [1/4] https://twitter.com/...
@om @om on x
“Adobe is deeply committed to keeping Figma operating autonomously and I will continue to serve as CEO, reporting to David Wadhwani.” @zoink on @figma blog. That's good because Adobe can't help itself. Everything inside is built from the view of past. I hope they don't ruin it.
@om @om on x
Adobe buying @figma for $20 billion is a tactical admission of its inabilities as a company to create cloud native experiences. It is desperately trying to find a way ahead out of its desktop web. A freight train aka AI will hit desktop Adobe. Figma is a good near term hedge!
@mamoonha Mamoon Hamid on x
Quick story: @zoink became part of the @KleinerPerkins family as a member of the inaugural @kp_fellows class more than a decade ago. While enrolled as an undergrad at Brown, a summer as a KP Fellow with Flipboard sparked his passion for product design. https://twitter.com/...
@hunterwalk @hunterwalk on x
Great, now I have to meet with a bunch of founders telling me they deserve Figma's 50x revenue multiple....
@reichenstein Oliver Reichenstein on x
Big tech throws around these big Billion numbers like it's nothing. 10 Billion here, 20 Billion there... 20 Billion for a tech startup doesn't sound crazy at all. But a design tool doesn't have the same scale as Insta or TikTok. It won't make big waves and affect everyone.
@reichenstein Oliver Reichenstein on x
It's not like a lot of designers haven't heard of Figma. Every designer knows Figma by now. We're not talking about a new Amazon with massive growth potential. Adobe's management has calculated that they can turn a profit on this. And they're probably right. I can't see how.
@reichenstein Oliver Reichenstein on x
I know that at this dimension the laws of gravitation do not apply and it's all about market dominance and somehow things will probably work out. But calculate this with indie glasses. 20B is 400 times Figma's yearly revenue. And the number of designers is limited.
@joepwilliams31 Joseph on x
Adobe doesn't have a ... stellar reputation of doing this well: https://www.cnbc.com/... “Adobe said it will integrate some of the features from its other products, such as illustration, photography and video technology, into Figma's platform.”
@noupside Renee DiResta on x
So impressed by everything @zoink and team have accomplished over the years. ❤️ https://twitter.com/...
@reichenstein Oliver Reichenstein on x
It's intriguing for me that in big business, you can buy a company that makes 51M per year for 20 Billion when you make 16 Billion in yearly revenue. Scaled down to our mortal dimensions, that would make absolutely no sense. https://news.adobe.com/...
@bigmeaninternet Malcolm Harris on x
Now they gotta decide if they're gonna pay out of their pocket or borrow the money and use cash on hand to buy their own dip. My figurative bet is on the second 🤷‍♂️ https://www.bloomberg.com/...
@ashleymayer Ashley Mayer on x
Big welcome to a new class of angel investors!! Your timing is excellent. https://twitter.com/...
@hunterwalk @hunterwalk on x
“What percent of our market cap do we need to spend to protect the rest of it?” That's how prices get calculated on deals like this. https://twitter.com/...
@rayno @rayno on x
Deal of the day. If the numbers are right it's buying it at like 50X current ARR! @Adobe to acquire design platform @figma for $20 billion https://www.cnbc.com/...
@chrismessina Chris Messina on x
I remember what a game changer @figma's launch was... https://twitter.com/...

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