Adobe & Figma

Why did Adobe acquire Figma?

Adobe aims to build the next generation of creative tools and help individuals and teams be more creative and productive. With this acquisition, Adobe will have a rare opportunity to power the future of work by bringing together capabilities for brainstorming, sharing, creativity and collaboration and delivering these innovations to hundreds of millions of customers.

There is another reason for the acquisition which is a sluggish economic outlook. Their shares were trading 10%lower than usual and Adobe hoped that buying out a competitor would give a thrust to its business.

Why Figma?

Figma is a design platform for teams who build products together. Born on the web, Figma helps teams brainstorm, design, and build better products— from start to finish. Whether it’s consolidating tools, simplifying workflows, or collaborating across teams and time zones, Figma makes the design process faster, more efficient, and fun while keeping everyone on the same page.

• Product

Their product is product design on the web. It lets customers collaborate on software as they build it. Design and prototyping, for individuals and teams, executed in a very streamlined and modern, cloud-based environment.

• Business Model

It is priced at a freemium model.

• Users

With a 4 million user-base, Figma focuses on providing collaboration while building. Figma has expanded its customer base from software designers at big companies like Airbnb Inc. and Alphabet Inc.’s Google to individuals building games, maps and presentations, particularly on mobile phones. It has also attracted a loyal student following.

• Competitive Advantage

There are other competitors such as Canva, Sketch, Lightricks that offer more consumer-friendly services, have dented Adobe’s once-unquestioned dominance. Figma has a simplified interface.

Weaknesses of Adobe

Adobe’s products for design professionals, which increasingly have been seen as cumbersome, expensive and outdated.

Was it a fair price?

We think the company overpaid for Figma, which indicates it was a defensive move. It was priced at a PE of 22X whereas the current SaaS is trading at 12X. A $20 billion price tag is a sizable jump for Figma, which was last valued at $10 billion in June 2021, when it raised $200 million. It notes that Figma’s total addressable market is $16.5 billion by 2025, and that “the company is expected to add approximately $200 million in net new ARR this year, surpassing $400 million in total ARR exiting 2022, with best-in-class net dollar retention of greater than 150 percent. With gross margins of approximately 90 percent and positive operating cash flows, Figma has built an efficient, high-growth business,

What next?

Figma will help accelerate improvements to Adobe’s main flagship applications, bolster its appeal to creative arts professionals and help find new customers. Adobe’s DNA is in design, though, and it has built out iconic products in areas like imaging (such as Photoshop), fonts, illustration, video and 3D and more. “With Adobe’s amazing innovation and expertise, especially in 3D, video, vector, imaging and fonts, we can further reimagine end-to-end product design in the browser, while building new tools and spaces to empower customers to design products faster and more easily