Adobe to purchase Figma product design platform for US$20bn

Purchase of collaborative product design on the Web, which has been scooped up after hitting $10bn valuation last year, is described as a coup

Analysts and industry commentators are throwing their backing behind Adobe's recent acquisition of Web-first collaborative platform, Figma, for approximately US$20 billion, describing the deal as a coup.

Adobe announced its intention to purchase Figma on 16 September, positioning the purchase as a way to to up the ante on product design collaboration. Figma was founded in 2012 in California by Dylan Field and Evan Wallace, both software engineers and with backgrounds at organisations such as Flipboard, Microsoft and Pixar. The pair pioneered product design on the Web, enabling users to design mobile and Web applications and prototypes through collaborative workflows and systems.

The company initially raised US$17 million in series A investment to build out its offering, and today boasts of millions of designers and developers and a loyal student following. Following a $200m capital raise last year and its acquisition of front-end design tool, Visly, Figma was given a market valuation of approximately $10bn. In total, the company had raised $332.9 million, according to Crunchbase.

In a statement, Adobe said the ambition in buying Figma is to reimagine creativity and productivity, accelerate its ability to support creative projects on the Web and advance product design. The companies bring together Adobe’s portfolio of Creative Cloud solutions with Web-based product design tools, collaboration and multi-player workflows.

It claimed the combined company will have a massive, fast-growing market opportunity and capabilities to become more accessible to more people. Target users include designers, product managers and developers.

“Adobe’s greatness has been rooted in our ability to create new categories and deliver cutting-edge technologies through organic innovation and inorganic acquisitions,” said Adobe chairman and CEO, Shantanu Narayen. “The combination of Adobe and Figma is transformational and will accelerate our vision for collaborative creativity.”

Figma has earmarked a total addressable market of US$16.5 billion by 2025. The company is expected to add approximately $200 million in net new annual recurring revenue (ARR) this year, surpassing $400 million in total ARR exiting 2022. It also reported gross margins of approximately 90 per cent and positive operating cash flows.

“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,” Field said.

The purchase price of $20 billion comprises half cash and half stock, with 6 million additional restricted stock units granted to Figma’s CEO and employees that will vest over four years subsequent to closing. The transaction is due to close in 2023.

Under the deal, Field will continue to lead the Figma team, reporting to Adobe president Digital Media, David Wadhwani. Until the transaction closes, each company will continue to operate independently.

Industry: A winner of a deal

Gartner senior director and analyst, Brent Stewart, said Adobe had acquired the single most important design tool on the planet. Literally.

“The overwhelming majority of professionally designed and engineered digital products in the world began life in Figma. Prior to this acquisition, Adobe’s Creative Cloud had become relegated to creative utility status, dominated by age-old stalwart titles such as Photoshop and Illustrator that are capable only of incremental growth,” he told CMO.

“Now, after 12 years of fast-follower status in the digital product design platform category, Adobe owns the market’s dominant platform as well as an emerging player in the visual collaboration market with FigJam. Financially, this gives Adobe two products with far more growth potential than anything else in the Creative Cloud portfolio, save CC Express.”

Steward also saw the Figma brand as an opportunity for Adobe to reconnect with the design community, now dominated by UX designers.    

Raab and Associates chief, David Raab, agreed the deal makes sense as a product move. “Adobe’s current products have some cloud-based versions but aren’t built from the ground up for Web-based collaboration like Figma,” he said. “But the very high price makes it seem that they were in a hurry to catch up with their customers before companies like Figma make serious inroads into Adobe’s core creative cloud business.”

Raab noted the stock market reaction was negative to the news, indicating most people think the price is too high. But in speaking to CMO’s sister publication, Computerworld, IDC research vice-president of collaboration and communities, Wayne Kurtzman, described the deal as a potential coup for Adobe.

The growth in the importance of visual collaboration is a key market factor for Adobe, and purchasing Figma is “exactly the right move,” he said. The challenge will be continuing enhancing the products as well as building on Figma's vision of collaboration, Kurtzman added.

Forrester VP and principal analyst, Jay Pattisall, saw Adobe’s acquisition of Figma creating a suite of tools for creative collaboration, enabling design, production and marketers with more digital tools to “replicate in-person magic”.

“The agencies’ environment of creative collaboration has always been one of its important attributes. Yet, fewer than 20 per cent of agency employees have returned to office full-time, challenging their creative culture advantage,” he continued. “The combination of Adobe Creative Cloud and Figma design collaboration technology will be a useful tool to help creative industries maintain and realize their value in the future of anywhere work.”

Following the acquisition, Stewart expected Adobe to focus effort on two main areas: Visual collaboration and generative design AI, beginning with AI-augmented design features.

“Generative design AI is another trend to watch with this acquisition,” he added. “With this acquisition, Adobe now has the most important design tool on the planet and the most sophisticated generative design AI [Sensei] under one roof. This will lead to some truly revolutionary developments, I believe.”

Other vendors playing in the collaborative product design space include Adobe’s own XD product, InVision, Axure RP, Moqups,UXPin and Lucidchart.

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