> 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.
>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?
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.
> 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.
- "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,...)
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.
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.
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.
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.
It could be more like freeform is Garageband to Logic. So a Design Pro app could be something in the future... They do seem to continue investing in Final Cut and Logic.
Exactly. Apple needs more killer apps for iPad. With the Pencil, touch, LiDAR, and Pro Motion display, iPad is the best platform for design… but it’s potential is unrealized. Plus, otherwise PC-only companies already buy Macs so that designers can use Sketch. iPads are easier for companies to buy & Apple would sell a lot of them if it brought a UX solution to iPad.
I’ve used Sketch, Figma, Adobe XD, InVision and am generally unimpressed with these as prototyping tools. They overemphasize pixel perfect screen design & under solve the most important UX task: documenting the end-to-end workflow through a user task. My favorite prototyping tool was App Cooker, a workflow-focused app for iPad that sadly got acquired and discontinued. There’s a ton of room for innovation in the design space.
I don't know. I've been impressed with icloud.com 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
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.
Figma are a competitor to Sketch though, in that many designers use Macs and for a while Sketch was the UI app of choice, but seems that Figma ate their lunch.
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.
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.
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...
"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.
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.
..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.
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).
Perhaps they could as things are but what would have happened if, say, Apple acquires Figma? What if Microsoft did? 20B is a lot of money -- to Adobe. Just to demonstrate how absurdly uneven the playing field is, Apple has ten times as much cash at hand.
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.”
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.
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)_/¯
"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.
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%.
What would it cost Adobe NOT to acquire Figma? I interview several UI/UX and product designers every week and without exception the tool they use if Figma.
Anyone else around for the dot com bubble? Why does the current tech M&A scene feel so eerily similar?
I recognize that inflation is quickly destroying the value of the dollar, but $20 billion is still a mind numbingly large amount of money to be throwing around at the clear end of a long term tech sector growth cycle.
This speaks as a brutal admission from Adobe corporate leadership that they lack the internal entrepreneurial skills to drive the development of new and innovative products in their market space, and based on the ~10% stock price drop since the announcement I imagine the market sees it the same way.
In an email from Adobe, they said "While we have been reducing our investment in XD, we will continue to support it." which means Figma has won. XD will be killed once people have switched to Figma. They didn't pay $20 billion to kill an app that's used by more people than XD.
Kill Figma as a competitor company, not as a product. Same reason Facebook Messenger still exists even though Meta similarly bought Whatsapp defensively.
Why would they even want that? They paid 15% of their market cap (30 considering the drop) for a new shiny toy, and now they would just… cash it?
Doesn't make any sense, their incentive is to keep it great and working.
Whether they can is a completely different matter.
> 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.