Founded in 2012, San Francisco-based Figma enables software developers and designers to collaborate remotely and design everything from presentation slides to mobile app user interfaces. Along with Australian start-up Canva, it is part of a wave of new browser-based design tools that have opened up the creative process to millions of non-designers, expanding the market and presenting a potential threat to Adobe, the traditional leader in design software . The purchase price, which will be paid half in cash and half in stock, is twice what Figma was valued at in its most recent private financing round last year and 10 times its valuation in 2019, despite the recent collapse of software stocks. It values the company at 50 times its annual recurring revenue, which Adobe said will top $400 million in 2002. Acquisitions at multiples of 50 times revenue and higher were common in the software boom that peaked during the pandemic, but multiples for most companies have fallen below 20 this year and acquisitions have become rare. The large premium contributed to a sharp drop in Adobe’s stock price early Thursday, which was prompted by a cautious earnings forecast from the company. The bearish projection wiped 16 percent, or $28 billion, off its value. “People in this environment are asking, ‘why big deals?’ There are questions,” said Shantanu Narayen, chief executive of Adobe. However, he claimed that Figma would be a “transformational” deal for Abode and that its browser-based approach and collaborative tools would boost the company’s overall market. Danny Rimer, a partner at Index Ventures, which claims to be Figma’s largest investor, said the company was on track for an initial public offering before talks with Adobe began. Figma CEO Dylan Field came up with the idea for the company after dropping out of Brown University with co-founder Evan Wallace at age 19 after accepting a $100,000 grant from Peter Thiel, the libertarian financier. Thiel began offering 20 “fellowships” a year more than a decade ago after deciding that the best scientists and entrepreneurs were wasting their time getting a traditional college education. The idea that sophisticated drawing tools could be delivered to a web browser was widely dismissed when Figma started, Field told the Financial Times, adding: “Literally nobody thought we could do it.” The company’s online tools would give Adobe a better picture of the “more modern, cloud-based, composable and open future” opening up for design software, said Liz Miller, an analyst at Constellation Research. The merger will allow Figma to bring Adobe’s imaging, 3D and video capabilities to its platform, Adobe said. The company is trying to tap into the millions of customers who use Figma, which has boomed during the pandemic as staff have been working remotely. Its clients include Twitter, News UK, Google and Netflix. In third-quarter results announced Thursday, Adobe posted net income of $1.1 billion on revenue of $4.4 billion, up 13 percent year over year or 15 percent on a constant currency basis.
