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Thoughts on Figma's acquisition by Adobe
$20B. Wow. 🤯
12 days ago, we witnessed the largest startup acquisition ever1 with Adobe acquiring Figma. This is BIG not only for startups but also for the broader tech world and billions of Internet users who interact with products designed with these software. Being in design tech, I was asked about the acquisition by so many folks that I thought it useful to share my thoughts publicly.
Did Figma sell too early? ⏳
For every promising company that grew 10x after acquisition, there are ten2 who rejected acquisitions only to sell for a fraction later. Figma has been on a tear and it is very likely they could have grown 10x on their own. But most successful acquisitions grow massively thanks to the people development practices, leadership bench, brand, balance sheet, sales processes, partnership channels, and other ways in which acquirers help. It is quite possible that Adobe and Figma make this one of the most successful acquisitions ever.
Did Figma break their promise to users? 😢
This is a myopic and cynical way of looking at the world. Figma and their users had a healthy and collaborative relationship but only because both sides added value to each other. Neither was doing this out of a sense of duty or honor. If Figma's product sucked, users would have voted with their feet. If enough users did not convert to paid customers, Figma would have shut off free accounts a long time ago. Free users are a great source of revenue and brand-building. It is hard to imagine Figma leaving their users in the lurch and the door open for competitors.
Will Figma’s product suffer? 📉
It takes a pessimistic person to think that Adobe would acquire Figma only to cripple their product. There is nothing to gain from this in the short or long run. It is in Adobe's best interest to continue investing in Figma and make it an unassailable product. Adobe has invested heavily in past acquisitions and made them important parts of their growth story and transition to the cloud. Figma will get this treatment especially given their hefty price tag.
How will Adobe and Figma integrate? 👫
Adobe has created big business lines with acquisitions. They will likely start this way with Figma. It will be a new revenue line item and operate as a separate business unit. They will do lightweight product integrations (their press release talks about access to stock photos and fonts) before exploring deeper connections in 2-3 years with Adobe Creative Cloud and Adobe Experience Cloud. Key Adobe executives will join to deepen Figma's enterprise Marketing, Sales, and Customer Success teams whereas their Design, Engineering, and Product teams will collaborate at an arm's length.
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Did Adobe overpay for Figma? 💸
Whatever it is, this was not a knee-jerk emotional response by Adobe. I imagine armies of analysts, consultants, advisors, Board, and executives on both sides were involved. Adobe is too disciplined and well-run to take rash decisions. However, I am sure someone very senior has a deep conviction that this deal is crucial to Adobe's very existence. Paying 50x of revenue seems very steep in 2022 especially when that price is 12% of your entire market capitalisation. However, remember that Creative Cloud is a ~$10B annual revenue business with 10% yearly growth and Figma is a ~$400M business with 200%+ yearly growth. Even at a modest 50% yearly growth, Figma will be a $3B annual revenue business in 5 years. And lest we forget, Figma's ambitions go well beyond design with FigJam. FigJam opens up Figma to the 99% knowledge workers who are not designers.
Will Adobe acquire Canva next? 🤤
Canva is the other huge business challenging Adobe. At $1B annual revenue, it is a much more sizeable business and one that caters to a segment that Adobe has never really served well - non-designers. Canva has even bigger ambitions than Figma - replacing Office 365 / Google Workspace. This will be very attractive for Adobe. However, it is very unlikely that shareholders and regulators will approve another mammoth acquisition at least for a few more years. Canva can be ruled out as a potential acquisition for Adobe.
What does this mean for competition? 🤼
This acquisition has created massive awareness about the opportunity in design tech. Startups that compete directly with Figma (InVision, Framer, Sketch) will see acquirer interest, likely from private equity firms. Startups in the broader design tech space (like Rocketium) will see a surge in investor interest. This funding will lead to more innovation instead of stagnation. A fraction of Figma users might leave them but this will not lead to a meaningful rise in adoption for competitors. They will either resort to FUD (Fear, Uncertainty, Doubt) or do the hard thing of building strong differentiated products.
Does Rocketium compete with Adobe and Figma? 🤔
We have a small overlap. Adobe Creative Cloud has a suite of products for every type of designer. Figma is primarily a product for UI designers. This makes both of them a part of creative operations within enterprises (aka the “Status Quo”).
Rocketium recognises that multiple teams communicate with end users using visual content - HR, marketing, merchandising, sales, …. This necessitates a cross-team product that combines content creation, collaboration, delivery, and analytics. Our approach is to complement software that enterprises already use and innovate in the big gaps that exist between these software.
We do this by:-
scaling creative content production to ensure each audience segment sees more relevant content by enabling the creation of hundreds of iterations for imagery, text, layouts, formats, and sizes
cutting production cost and increasing efficiency by automating away dozens of repetitive non-creative tasks
eliminating wait for business teams by helping them get visual content without waiting for designers or agencies with self-service content authoring, collaboration, and centralized asset libraries
ensuring brand compliance for visual content across teams and geographies with an automated compliance engine that runs hundreds of custom checks
getting rich creative insights on how products, CTAs, models, … in visuals impact performance by pulling cross-platform data, combining it with AI-enhanced tags, and enabling powerful visualisation
This is an incredible outcome for a passionate team that solved a tough problem and worked tirelessly for 10+ years. After a well-deserved celebration, I wish they continue to build a great product, team, and user experience that brings great design to the world. 💎
WhatsApp was originally acquired for $19B but the price went up to $22B due to Facebook's soaring share prices.
Ten is a placeholder but we have seen this with Groupon, Yahoo!, Zendesk, and many others.