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On Adobe acquiring Figma

On Adobe acquiring Figma


·September 23, 2022


Regarding the justifications for Figma's price:

> most startups cut their valuation by a lot in 2022

Most startups are not used by every single other startup, whereas I would be very surprised if any startup doesn't use Figma for UI design. I've never used Canva and never heard a company using it. The only time I heard of Canva is to create a nice looking CV. Comparing outliers to the average/most isn't very helpful.

> Another way to peek at a startup’s valuation is by revenue and growth multiplier.

That is clearly not the only factor in valuation. It also depends on Figma's cash, founders desperation (very low, especially to sell out to Adobe), acquirers desperation (very high), how unique is Figma (Sketch, Adobe XD and Canva are way worse), and loads more factors.

I would guess the real reason the Adobe price tanked was because it was a huge admission of defeat. Previously, you can't see how bad Adobe XD has performed, and now you know it's so low it doesn't matter. They can't build something people want. Nobody wants to use Adobe XD, even when IIRC, it was free at one point.


If every startup uses something, it's not a positive thing as then they are near peak revenue. Their revenue is $400m, and 50x multiplier in late stage is exceptional.

For canva and other small companies, I would give higher valuation to revenue multiplier.


If every startup uses something today, it often means that it's just starting to be noticed by large enterprises, and in five years will have spread there too.

There's probably a big untapped market for Figma in boring enterprise software and internal design needs for marketing, etc.

I'd bet that Microsoft was bidding for Figma too. In that light, Adobe's $20B price is a sign of strength because they were able to afford to outbid Microsoft for an extremely strategic acquisition. Adobe isn't taking enormous amounts of expensive new debt to fund this. The stock market's opinion of the deal doesn't affect Adobe's finances directly.


Not every startup is eating adobes lunch


>whereas I would be very surprised if any startup doesn't use Figma for UI design.

have startups stopped using Invision?

>acquirers desperation (very high),

I would think acquirers desperation (very high) would be another word for 'dump this stock' which to me is what the article seems really about. People dumped adobe, why because Figma not worth that unless acquirers desperation (very high). uh oh, who wants to hold a desperate company?


"have startups stopped using Invision?"

Speaking as a designer, Invision has never felt like a serious design tool and they've had a constant struggle to find their place in the market. Invision started life as a prototyping tool, and they dabbled with Studio sometime around 2019, but recently they've morphed into more of a collaboration/whiteboarding tool. They're probably more akin to Miro or Jamboard than Figma these days.


Ok I thought that might be the case, although not sure why. As a developer I found less irritating than I am currently finding Figma, although that might just have been the project.


InVision is not a design tool, it is a prototyping tool.


> founders desperation (very low, especially to sell out to Adobe)

What makes you say this metric is "very low"?

Evan seemed (to my eyes) to be the technical drive behind Figma as a product, and left in 2021 (shifting focus to esbuild)

Dylan has come out criticising Adobe (in what mainly seemed like good marketing) in the past, but other than that, his focus has been investment, and - more recently - NFTs, crypto & web3. An exit seems very natural.


Think about it this way..

- "Every startup" does not mean big number. Startup are handful if compared against all kind of business that exist (from car dealers to big retailers to IT behemoths...)

- In typical tech company only handful of people use Figma (Design, PMs, Front end engg)

Whereas Canva's addressable market is anyone and everyone who has need to produce documents that are not wall of text (all young, old - resumes, birthday party invitation,...), all companies (newsletters, flyers for their events,...)


Canva is huge among casual users, eg. school-age children.


True, but I think that's the point. It's not really competing as directly in the Adobe/Figma market. Figma has massive corporate use & Canva's casual users would've been much less likely to have shelled out for a CS/CC licence anyway.


That market, while large, is difficult to monetize effectively.


Implication in another axis: proprietary is underrated and overbashed. I'd love Adobe to prove me wrong by making Figma file format opened.


Yeah it's hard to not say yes to 20Bi. Take the money and do whatever you like.


I simply believe Apple/Microsoft were circling Figma for an acquisition. That would be serious competition for Adobe and I imagine they got scared and threw the kitchen sink at Figma.

If you're Apple or Microsoft PM. Please make internal noise to purchase a Figma competitor like Sketch and give Adobe/Figma a run for it money. Adobe clearly doesn't like competition.


*Some* VCs will invest and play off this, knowing they can run up the price by starting a bid war.

How it plays out.

VC: Hey Oracle, did you hear salesforce wants to buy XYZ Startup for 1M, you want to counter?

Oracle: Screw Benioff. I'm in for 2MM.

VC: Hey Salesforce, thanks for the first call. Oracle wants to buy XYZ startup for 4M, you want to counter.

Salesforce: Those devils, I'll do 5M.


VC continues the game until they've hit the ceiling or are about to, and walks away with a ton of cash.


I wish I had this much clout as a VC but I'm sad to report that it doesn't quite work out like this at all.


Figma doesn't sound like something that would fit Apple at all.

One of their differentiators is their performant web app which is something Apple is very much against. Then collaboration where Apple is also bad at on top of iterating fast, which Apple is also bad at for software.


Wouldn’t be surprised if Apple Freeform matures into a Figma competitor


I would absolutely be surprised if they did that. Apple does not seem interested in this line of apps, and its quite a lot to go from glorified paint to a Figma competitor.

There's just not much precedent for Apple caring about building out apps for 'pro' work - Final Cut and Logic Pro as historical anomalies.


I don't know. I've been impressed with in the past. They didn't need to do that, and yet they build full featured web versions of their office suite.


Maybe it’s lack of imagination but I can’t see how Figma fits into Apple’s software portfolio. Sure, it’s in the realm of “creative stuff” but so is a lot of software Apple isn’t involved with


Similarly to how Final Cut is a video editing tool and Garageband is a music production tool. Why can't Apple also do a digital design tool?


Figma runs on the cloud and doesn't move hardware sales. FCP and Logic were 2 smart strategic acquisitions which helped Apple retain “PRO" users at a time where Windows had become good enough for this market segment. PRO users continued to purchase Apple's overpriced hardware when they were clearly falling behind PC's in terms of sheer performance and value because they were stuck in these ecosystems. Figma on the other hand can run even on a Chromebook so no need for users to upgrade their workstations every couple of years.


I agree that would justify it. As they admitted, the article’s author is an outsider.

They threw out some questionable aspects of the purchase but let’s also realize they are not objective. This person worked on XD and haphazardly already consider this a loss of their personal investments in Adobe.


Is Sketch still macOS only? That would seem like a major barrier.


I read recently that they have a read-only web version now


So not at all a competitor to Figma then.


Why would Apple be interested? They really don't care about applications anymore.

I'm a bit surprised they even bother with FCP and Motion at this point. I have no idea what they would do with Figma. They can't even get SwiftUI to work after several years, so offering up a design product as part of Xcode or something would definitely be lipstick on a pig.


Apparently someone from the Xcode team modded that down. There's always someone eager to take offense at facts.


Adobe's financial performance has been pretty outstanding.

In 2015, their net income was 630 million dollars with 13,893 employees.

By 2019, through steady growth they have grown their income to 2,951 million dollars with 22,634 employees.

In other words, while in 2015 an employee produced 45347 dollars but in 2019 the same person produced 130739 dollars.

I would be slow to presume they do not know what they are doing.

Does anyone even know when Adobe last had a net loss quarter?


As far as I understood they're making quite good on their analytics software/services. I had a discussion on this with one of my friends who is more knowledgeable on the issue about 2 years ago, and I can't remember the exact name of the service/product, but I got out of it that they're processing a huge amount of data as analytics for large companies (and their associated campaigns).

I remember that I found it strange back at the time that almost no-one was mentioning this in the tech media, all eyes were focused on the analytics businesses related to Facebook and Google.


They acquired Marketo, yes.


I don't think this author did much research prior to writing this piece.

> Who is David Wadhwani, the person Figma is going to report to? I have never heard of this name while working at Adobe. A little further research shows he joined Adobe in June 2021, just over a year ago.

A quick look at his LinkedIn profile shows that he worked at Adobe for nearly 14 years prior to coming back as an exec. A little more digging shows that he came to Adobe back in 2005 via acquisition of Macromedia.

> even with Adobe keeping Figma as independent as it can be, it will develop and grow at a much slower pace since there will be no venture capital funds pouring in

Figma was already profitable. From all the reports, it doesn't seem like they had any intention of raising another round to continue growth.

> With accelerated stock vesting triggered by the acquisition, a lot of Figma employees will jump ship to their next adventure.

There is no accelerated vesting.

It's fine to criticize this deal from a business strategy perspective, but don't make up details to hit the word count...


Some additional context around XD vs Figma:

"After seven years of investment, Adobe XD was bringing in just $15 million in annual recurring revenue on a standalone basis — a minuscule fraction of Figma's $400 million annual recurring revenue. (That, in turn, is a minuscule fraction of Adobe's overall annual revenue of $17 billion.)"[0]



The person that the Figma org will report it just recently was with Greylock investing in Figma? Even if he has no money in it himself, it smells like taking care of family and friends. They'd remember his largesse and return the favor somehow later.


He was also at Adobe for 15yrs.


According to TFA, he was at Adobe for 1 year.


According to David Wadhwani’s LinkedIn, he was at Adobe from 2002-2015 with his title listed as SVP and GM of the “digital media business unit” before rejoining in 2021 as the Chief Business Officer.


Adobe is David's home, he just back got home after adventuring a bit.


This rings so true..

..even with Adobe keeping Figma as independent as it can be, it will develop and grow at a much slower pace since there will be no venture capital funds pouring in, and Adobe’s resources drained to pay off the acquisition cost. The only winner is Figma investors. This acquisition is a lose-lose-lose situation for Adobe, Figma, and the design community.


That part of the article rang true and broke my heart a little bit. I only discovered Figma recently and was trying to decide if I should dive in and really learn it. Now I am much less excited about the prospect. The last thing I want is to be “nudged” towards an Adobe account. I would be surprised if Adobe doesn’t mess this up.


Everything by Adobe could be much better if they weren't slumlords of software.


I think some separation time from his project will help him understand that the market did not agree with him.


I thought the market did agree with him. Adobe's stock went down because the market, like the author, thought they paid too much, right?


His beef is that his project was viable competition. The design market and the purchase price made it clear that was not true.

I don't think they paid too much. It will give Adobe 10 more years of subscriptions without effort. Without Figma, they would be reduced to metrics software (in 10 years).


Another way of pricing the company is price per customer. Figma sold for $400,000 per paying customer. That seems like a lot to me.


Got it, design market vs. stock market. The acquisition at that price was like Adobe admitting they thought they couldn't compete.


It’s not really possible to say precisely why the stock went down beyond “a certain % of shareholders now believe that the price today is better than it will be whenever they originally intended to sell it.”


Agree. The author comes off as quite salty.


This deal feels very bizarre to me, albeit for completely different reasons. I frequently, even within one project with multiple designers will get figma, sketch, xd, photoshop and illustrator designs and it makes almost no difference for me. Perhaps I’m an anomaly, but when a creative asks what format to do something in I always tell them whatever they are most efficient and comfortable in. And when I do designs, out of years of Adobe dominance, I reach for xd, but feel comfortable in any of the other ones.


> Who is David Wadhwani, the person Figma is going to report to? (...) A little further research shows he joined Adobe in June 2021, just over a year ago. His last position prior was Venture Partner at venture capital firm Greylock. (...) Greylock invested in Figma in Series A, B, C, D, and E! Figma Series A’s price was $0.2 per share; it 200x’ed at the acquisition deal.

Even if he didn't personally invest in Figma, this doesn't look good at all.


You can also spin it the other way, that Adobe hired an expert on Figma, someone who knew it well, has seen it grow, knew how it looked on the inside, and would probably easily spot any time the Figma team would be bullshitting during negotiations. At least one such person on your team is I think a major asset, but of course someone like that will likely still be connected in some fashion to that company, and create possible conflict of interest situations which means legal risk.


Wouldn't that be more of a consultant role, rather than having the entire newly acquired org report to him as a manager?


Would you hire a consultant to manage a $20bn relationship or a FTE?


Maybe the author should've opened David Wadhwani LinkedIn profile instead of just linking to it. He worked for Adobe for 13 years until 2015 and rejoined in 2021.

PS: not defending the purchase or Adobe but this statement in the article is factually wrong ¯\_(ツ)_/¯


The author's main point is he worked at Greylock before Adobe - factually accurate.

Also accurate - conflict of interest if he in anyway was part of acquisition efforts.


Factually accurate is the lowest bar to clear.


Complete noob in business/whatever this is, why doesn't this look good?


Does that qualify as a form of insider trading or some other violation of FTC regulations?


By now we know that if it’s only unethical it doesn’t violate regulations.


"Adobe XD supports multi-player mode for three years now" – this is maybe true for some small batch of alpha version users. The designer at my last startup insisted on using XD and it was a huge pain because you couldn't work in parallel – the first person opening a file was locking it down for others to change.


This seems strange - they are very strongly featuring "live co-editing" as the supported feature set:

If they didn't have support for that this would be a pretty egregious lie in the "here's our list of supported features" pitch to buyers?


And no one would be surprised, coming from Adobe - destroyer of souls.


After his mentioning of having a substantial portion of his net worth in Adobe stock, all I could think of is “oof, this is why everyone says to diversify.” Since he left Adobe in August 2021, Total stock index is down 17.7%, while ADBE is down 54.6%.