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Issue #82

Adobe acquires Figma

Everybody, breathe! Everything is going to be alright. Or at least that’s what I’m hoping for. This week’s news was a shock, but after calming down and thinking about it more, they’re not as surprising anymore.

First, why would Figma sell? After raising $332.9M in six funding rounds, the company is no longer truly “independent”. Investors want to get a return on their capital, so there is pressure for a liquidity event — either get acquired or go public. Considering the current market state, the IPO may not be in the cards and many companies postpone it. So the only two real options are to sell now or delay the decision while continuing growing the business. I won’t be surprised if the “unpredictable, inflationary environment” mentioned in Dylan Field’s announcement played a role in this decision.

This brings us to the second question — why Adobe? The answer is pretty clear: it’s the only company in the creative tools market that can afford it, and it’s being threatened by Figma. While Adobe’s entire business is well diversified and was never in danger, XD and Figma had a similar market share in 2018, but since then Figma became a standard choice for UI and prototyping while leaving competitors in the dust. Adobe could keep trying, but it’s very hard to bring a true collaboration to the desktop app.

Let’s take a moment to appreciate how special this deal is. $20B is a mind-blowing number, but not that rare for a software company. What’s really special is A) it’s a private company, and B) a 50x multiple of the ARR (annual recurring revenue) that brought it to this valuation. Multiple sources call this the highest multiple paid for any software company. For comparison, Microsoft paid 25x revenue for GitHub and Salesforce paid 26x for Slack. That shows how important and valuable Figma is to Adobe.

So what does it mean for the future of Figma? I was a big fan of Macromedia Freehand in the early 2000s and vividly remember how Adobe killed it after acquiring Macromedia. That’s not going to happen here — as Dylan Field said during All Hands, you’re not paying $20B to kill a product.

Letting Figma operate autonomously is critical, so hopefully Adobe will keep its word and not get too involved. (If anything, Kurt Varner’s experience of being acquired by Adobe brings promise.) I still use and love Photoshop, Lightroom, and InDesign (while despising Illustrator), and think Adobe is doing great things with AI and mobile workflows. Integrating Figma with their products for image editing, animation, and fonts would be pretty sweet. I expect Figma to become Adobe’s core offer for UI design and collaboration, eventually “sunsetting” XD. So far, I’m mostly worried about Figma’s rapid development speed being slowed down by Adobe’s processes, and a possible exodus of core Figmates after a well-deserved cash-out. I guess we’ll see how it plays out in a year or two.

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