What kind of company is Figma?
Company profile
Figma is a very young company. It was only established in 2011, and the first version was launched in 2016, which is just over five years ago.
Figma is a vector graphics editor and prototyping tool that enables project team members to collaborate and update web-based collaborative work. It is one of the most famous software for new generation user interface design and user experience design.
Competitors
Before Figma, the most famous and successful in this field was Sketch. It’s also software that has only been around for less than a decade.
Adobe’s XD is also a major competitor to Figma, and even though Adobe XD has many well-known product integration capabilities, it is not a rival to Figma.
Famous customers
Note that the top companies in the software industry by market cap are all Figma customers; it shows how successful Figma is.
- Microsoft, switch from Adobe to Figma
- Oracle
- HuaWei
- DJI Technology
- Salesforce
- Stripe
- Airbnb
- Dropbox
- MillerKnoll
Why did Adobe buy Figma?
New software growth areas, can’t affort to lose
Figma is a leader in collaborative tool software for user interface design and user experience design. As it turns out, Adobe’s XD can’t beat Figma at all. One of the unspoken rules in the mall is that if you can’t beat you, you will be bought.
Find new revenue source
Over the past ten years, Adobe has benefited from the successful transformation of SaaS cloud, coupled with its strong product line with few rivals, and has played smoothly all the way, and its stock price has only risen all the way.
Rescue plummeting stock prices
But growth stocks, which started in the third quarter of last year, have started to fall across the board, and the systemic drive that has benefited most companies from the pandemic has disappeared. Make small caps, growth stocks, small software stocks down at least 50-95% across the board. This year’s decline began to spread to all tech stocks, to all blue-chip large-cap stocks; Adobe is certainly not immune.
With a high base period and intense competition from new software startups (Figma is one such), Adobe is clearly struggling with sluggish revenue growth, with the stock down 47% year-to-date. For a software company with the top market capitalization, it is a serious injury.
What did Adobe pay for this acquisition?
Transaction details
The deal, worth $20 billion in cash and stock, is the largest merger in Adobe’s history.
Absurd, too high a premium paid
The problem is that in May 2020, its valuation was $2 billion. In June last year, Figma’s market valuation was only $10 billion. This does not require a lot of professional knowledge. In addition, since the stock market has fallen sharply this year, the valuations of all listed or unlisted companies have fallen sharply, and unlisted unicorns have fallen even more than listed companies. Apparently, Adobe paid too much, and an unreasonable premium.
This is why Adobe’s stock price fell by 14% on the day after the news was disclosed! The stock price fell below 300 yuan and fell to a new one-year low of 299.5 (9/16/2022).
What did Adobe pay for it?
For this merger, according to Adobe’s own and Wall Street estimates:
- Adobe will have to cancel or significantly reduce the stock buybacks it has done in the past.
- Adobe had to borrow out because the amount was too large. will worsen the company’s financial situation.
Adobe currently holds only $3.87 billion in cash.
How is Figma doing?
2022 performance
Adobe announced that Figma’s revenue may reach $400 million in 2022, an annual growth rate of nearly 3 times, and a gross profit margin as high as 90%.
What is the market share and competitiveness?
In 2017, Sketch’s market share led all market players, and other competitors combined were not as much. Note: Figma only launched its first version on September 27, 2016; it has taken the market sharply since its launch.
With Figma’s market share in the user interface design and user experience design collaboration tool software industry, it is almost impossible for other competitors to surpass it in the foreseeable future; and Adobe has tried it himself and failed. The difficulty is too high.
Adobe sees farther
Figma may intervene with Adobe’s existing products in the future
Don’t forget that Figma is a collaborative tool software for user interface design and user experience design. It must integrate multimedia software, which is the core of Adobe’s products; in the long run, Figma may be involved in Adobe’s existing products line, will become a potential potential opponent in the future.
Figma has big influence
In addition to software engineers, project managers, sales and marketing staff also use this product. Therefore, the scope of use and influence is expanding day by day.
And it is not only used by the software industry on a daily basis, but also used by the publishing industry, the multimedia industry, and almost all walks of life.
Postscript
On December 18 2023, Adobe and Figma said that they had mutually agreed to terminate their $20B merger amid rising regulatory headwinds across the globe.
In a statement, the two companies said they believe “there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.”
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