Adobe/Figma

Sep 16, 2022

Figma figured out how to disrupt in multiple dimensions, and not only with the actual software – Figma was early to figuring out how to put rich applications into the browser by transpiling C++ to asm.js in 2012 (and eventually via WebAssembly in 2017).

  • Collaboration is hard to bake into products that have existed for decades (e.g., desktop applications). Multiplayer data structures need to integrate deeply into a product's interfaces (e.g., file formats, APIs, UIs, etc.). It's why multiplayer over Google Sheets is better than multiplayer on Excel on the Web (despite Excel being a superior product in every other dimension).
  • The common thread behind Canva and Figma – bottoms-up and web-first. They offer generous free tiers that are instantly accessible to anyone. No applications to download. It's part of the reason why Figma beat out Invision (Sketch).
  • Disruptive business model – pricing (subscription vs. license fee) and software delivery (SaaS vs. desktop). Adobe shifted to subscription in 2012, the same year that Figma was founded (Canva was also founded in 2012).

But companies at scale must defend the moat. For Google, the moat is mobile (Android, Chrome), identity (driven by daily-login applications like Mail and Calendar), data gravity (your content and others' content – YouTube), and more.

Figma, while not yet a platform, was an existential threat to the Adobe moat. Adobe's moat keeps users on the platform – from photo editing to signing freelancing contracts, the entire creative suite is Adobe. M&A is a tough way to defend the moat, but large companies can't innovate the way that startups can (half of M&A transactions fail to work – integration problems, perverse incentives, and everything in between).  

The markets aren't excited about the acquisition – $ADBE is down 17% today. Figma represents the highest ever NTM1 revenue multiple ever paid for a SaaS company at scale (roughly $400m revenue).

  • It represents the largest private technology company sale ever.
  • Bundling is a strong economic force. With it comes pricing power, consumer surplus (until it becomes anti-competitive), and better distribution through cross-selling.

The ex-CTO and co-founder of Figma, Evan Wallace, is also the author of esbuild, which I've written about in New Wave Frontend Toolchains.

1NTM = Next twelve months. A forward-looking projection based on current performance, which is usually used when thinking about SaaS multiples and comparisons.

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