Issue #82 • September 18th, 2022

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.

— Eugene

Adobe acquires Figma

A new collaboration with Adobe

The official announcement from Dylan Field.

Adobe to Acquire Figma

The official press release from Adobe. “Adobe and Figma will benefit all stakeholders in the product design process, from designers to product managers to developers, by bringing powerful capabilities from Adobe’s imaging, photography, illustration, video, 3D and font technology into the Figma platform. […] The transaction is expected to close in 2023, subject to the receipt of required regulatory clearances and approvals and the satisfaction of other closing conditions, including the approval of Figma’s stockholders.” See also Adobe’s Investor presentation on acquisition.

#Adobe

Figma’s CEO pledges to “retain our identity” as users fear the coming Adobe regime

Adobe representative to Protocol: “While we have been reducing our investment in XD, we will continue to support it. We are excited about Figma’s vision for the future of product design and the potential of our teams coming together to benefit our customers. After the transaction closes (expected in 2023), we will share more information.” RIP XD.

Figma: A Random Walk in Palo Alto

Adam Nash, one of the early investors in Figma, remembers his conversation with Dylan Field in 2013 about WebGL and moving graphic design to the cloud: “Dylan was not deterred. He explained that the heavy compute was the exact reason why moving to the cloud made sense. By providing high powered machines in the cloud, anyone could get access to an almost arbitrary amount of power without spending $10K, and latency & bandwidth had progressed to the point where shipping the UI bits to the client was a solved problem.”

Performance is the Moat

Mike Davidson, ex-VP of Design at InVision and Twitter: “Figma did a lot of things right over the ten (yes, ten!) years they’ve worked on the product, but one thing they did that no one else has been able to replicate is meet and in some cases exceed native app performance inside of a web browser.“ Also: “Within the next several years, it’s going to be possible to go from idea in the morning, to prototype in the afternoon, to working code in the evening… and the company who can do that most thoughtfully is going to be one of the most important companies in the world.”

Figma’s “Big Wins” from 2013

Andrei Herasimchuk, the ex-Lead Designer at Adobe, shares a list of “big wins” and “small wins” that Figma cofounders and he wrote down in December 2013. Pretty amazing to see how almost all of it is a reality now. (“Modernizing masking & gradient UI” sounds pretty sweet though!)

Scott Belsky on the acquisition

Adobe CPO and founder of Behance: “Remembering the deluge of doubts in 2012 when we shared Behance’s acquisition, 10yrs later, platform grew 30x, product stronger than ever, brand intact, still free, high growth, and continued pipeline of goodness. But it takes work + principles. Like all bold moves, show > tell.”

#Adobe

Why Figma is Worth $20B And Other Observations From The Adobe Acquisition

Hunter Walk: “Figma had crossed the ‘this matters to Adobe’s future’ rubicon. They hit $400m ARR and were continuing to double. Figma revenue, independent of margin, was increasingly displacing revenue that might have gone to Adobe, or more specifically, creating pricing pressure on Adobe.”

#Adobe

Figma’s Valuation vs. ARR

David Sacks on late bloomers and responsiveness of VC markets. See a more in-depth discussion in Episode 96 of the All-In Podcast.

It’s nearly impossible to make legacy applications multi-user collaborative

Fantastic thread on why collaboration features in XD or Sketch would never match Figma: “In short, Adobe would have never caught up to Figma. It’s genuinely easier and cheaper for them to use Figma’s architecture to rebuild all of their existing applications than to try to make any of their existing apps as delightfully multiplayer as Figma.”