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

Hint: The Answer Doesn’t Involve a Spreadsheet

Hunter Walk

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I’m not an investor in Figma. I don’t know Figma CEO Dylan Field. And I’m not a designer. So this means I’m either perfectly positioned to give you my objective comments on Adobe’s $20 billion purchase of the startup, or totally unqualified to ask for your time on this matter. With that out of the way, here are three statements about this acquisition.

  1. Is Figma really worth $20 billion? I mean that’s 50x ARR!

Any spreadsheet that Adobe’s corp finance function used to justify the multiple, or the bankers presented to suggest what valuation it would take to get this deal done, is basically CYA math. There’s one single method for Adobe’s calculation:

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. It was a product designed natively to be collaborative, to be easier to use than Adobe’s professional tools, and without the baggage of features and nomenclature leftover from years of software releases, platform shifts, and business model changes.

When the autonomous car company Cruise got quickly snapped up by GM in 2016 jaws dropped at the $1b+ reported price (we were small investors in Cruise). The answer there was the same: if autonomy is the potential future of your industry and you’re not yet strong in that area, what’s percent of your market cap is it worth to bring those cards into your hand. In that case it was roughly ~2.5% if I’m remembering correctly. In Adobe’s case it was a larger percentage because Figma is way further along as a business and the certainty the future of design at least looks like Figma is high. There you go.

Once the acquiring company CEO and Board is framing the transaction this way the startup has won. It’s gonna be a huge payout. And in venture, one thing is true about huge exits….

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Hunter Walk

You’ll find me @homebrew , Seed Stage Venture Fund w @satyap . Previously made products at YouTube, Google & SecondLife. Married to @cbarlerin .