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Sep 21, 2022
What’s the story, Adobe? All you need to know about the mammoth Figma acquisition
Opinions and theories are flying amock on the recent news of Adobe’s acquisition of Figma. Are we disenchanted because a disruptor succumbed to an incumbent? Was such a high-valued deal a poor decision in this current economic climate, or was it a strategic collaboration, pointing to industry expansion?
Who will it impact, and what does this spell out for the users, the design tool startups, or the remote work tools industry?
“Without data, you're just another person with an opinion,” said W. Deming, and we agree. So, here are the tools and data sources to put your opinion to the test. Navigate your hunch and lead it to a better-informed conclusion in 7 steps.
Step 1: Start with the news
We all read the headlines…
Adobe to acquire Figma for USD 20 billion
- Adobe entered into an agreement to acquire Figma, a leading cloud-based collaborative design platform, for USD 20 billion in a half cash and half stock deal. This deal makes Adobe the dominant player in the market as Figma has been directly competing with Adobe’s products (specifically Adobe XD) in the past. The acquisition is expected to close in 2023 subject to regulatory clearances and other closing conditions including Figma’s shareholder approval.
- Adobe plans to utilize Figma’s web-based and multi-user capabilities and is likely to combine Figma’s products into the Adobe creative suite. Figma expects to leverage Adobe’s expertise in 3D, video, vector, and imaging to improve its product design.
- Adobe reports a USD 16.5 billion total addressable market for Figma by 2025, and Figma is expected to contribute USD 200 million in net new ARR this year, exceeding USD 400 million in total ARR exiting 2022 (valuing Figma at 50x its current ARR).
But here’s how you can read between the lines…
Step 2: Understand the scoop
💡Analyst QuickTake
The acquisition price of USD 20 billion is a sizable jump from Figma’s previous valuation of USD 10 billion at the time of its Series E round in June 2021. Figma’s significant growth could be because its web-based platform has generally been the choice of design teams that prioritize collaboration features, as it is purpose-built to enable collaborative design in a single space, as opposed to Adobe XD, which is typically more suited for designers already invested heavily in Adobe’s ecosystem. In a similar move to bolster its Creative Cloud offering, Adobe also acquired collaborative video editing platform Frame.io in August 2021.
Don’t form an opinion just yet. Let’s flashback to Figma’s journey…
Step 3: Browse Figma’s company profile
Figma is a cloud-based collaborative design platform that allows teams to work together on a virtual canvas to visualize and create new projects in real time. It offers a range of features, including sticky notes, emojis and drawing tools, pre-built lines and connectors, and cursor chats. In addition, Figma products include voice chat, which means users do not need to log in to Zoom or Google Meet while using Figma. Figma caters to individual designers, small firms, and enterprises with 80% of its users outside the US (December 2019). The platform focused on providing an end-to-end to separate itself from peers by adding more features to its platform or growing inorganically. The company reported that it has seen its user profile expand from design teams to usage across entire organizations (outside design teams) during the Covid-19 pandemic.
The company launched a whiteboard tool for flowcharts and brainstorming called FigJam (April 2021 ) which caters to non-design users. In October 2021, FigJam introduced plugins and widgets, enabling users to customize their spaces with productivity, note-taking, and data visualization tools. It also introduced “Open Sessions,” allowing companies to invite external parties to their sessions for 24 hours, without an account.
Figma operates a subscription-based business model which includes a freemium plan and paid plans ranging between USD 12 to USD 45 per user per month. FigJam is also available on a freemium basis and paid plans were reduced (October 2021), ranging between USD 3 to USD 5 per user per month.
Funding and financials
Figma announced a USD 200 million Series E funding round led by Durable Capital Partners in June 2021. The round valued Figma at USD 10 billion and followed its USD 50 million funding round in April 2020. The fresh funds were expected to be used for product development, expanding its offering, and increasing its employee base to 500 by the end of 2021. Furthermore, it planned to explore the M&A market.
Key competitors
Source: SPEEDA Edge: select section of the Competitive Analysis module
Got a good grasp? Consolidate your ideas with insight.
Step 4: Check out our partner, Sacra’s company report
Product
Figma’s disruption of Sketch and Photoshop followed a similar formula as Google Docs displacing Word and Slack displacing email. Via the web, Figma replaced a siloed, asynchronous, file-based experience with a real-time, collaborative, whiteboard-like experience.
Figma consolidated their victory by tapping into an intolerant minority—designers. Figma smoothed out many of the kinks in Sketch and Adobe XD (like the designer-developer handoff). Many designers today refuse to use other tools.
Most of Figma’s growth to date has been through product-led growth. Their freemium model and short implementation cycle have contributed to their sales efficiency, while product decisions and purchase decisions are made by the same people, e.g. head of design, as opposed to the head of IT. Contract size has not (yet) grown sufficiently large for end-users and decision-makers to decouple though we would expect this to happen at some point.
We believe that Figma has an attractive land and expands the dynamic within an organization. An example of wall-to-wall expansion is that product and brand designers start to use Figma, then product managers, content designers, engineers and UX writers gain editor access to comment or repurpose the work for their own needs.
Part of the core strength of Figma’s web product is how it facilitates sharing and expansion across the organization. As the charts above show, Figma is a core tool for designers today, and it is becoming a core tool for product managers.
It is still in the early days to assess how well Figma will adapt their PLG approach into a sales motion that can sell into the enterprise. Some of Figma’s current enterprise customers include Microsoft, Airbnb, Square, Coinbase, Zoom, and Uber. Our research turned up that about 10% of Canva’s revenue today is from the enterprise. Teams upgrade from the self-serve pro plan to an organization plan when the company wants to have single sign-on, to manage access control, boost security, and discuss bulk pricing discounts when they have more than 500 users.
Competition
Figma does compete with Adobe and its 22M+ paid subscribers via Adobe's UX design tool XD. Many organizations are deep in the Adobe ecosystem because of legacy must-haves like Photoshop, and via that bundle, get access to the Figma-comparable XD.
Today, that tends not to stop organizations from using both. What we’ve found from our research is that organizations will pay for Adobe Creative Cloud because there are certain professional tools they need, but they will also pay for Figma—because their designers won’t use Adobe XD.
Our interviews and research indicate that in some organizations, tools like Adobe XD or Sketch are no longer seen as direct substitutes for Figma because Figma has become more than a designer tool.
Figma not only replaces Adobe XD or Sketch, but also eliminates the cost of exporting mock-ups to create design documents. It becomes a source of truth and a place where product decisions are made.
TAM Expansion
There are three core drivers of Figma’s growth at the moment:
Growth of market share: Continuing gain of market share from Sketch, InVision, and Adobe XD. Survey respondents using Figma grew from less than 20% in 2018 to almost 60% in 2020, while at the same time, respondents using Sketch fell from about 35% to 20%.
Seat expansion: By making design more accessible/collaborative and releasing new products like FigJam, Figma gains more users inside organizations. Canva illustrates where this kind of expansion can go—it started off as a graphic design tool, but today, Canva displaces multiple categories of products from productivity tools, video editing, print services to graphic design.
Budget growth: With the move to remote post-COVID, companies’ budgets for tools like Figma are expanding. Office rent spared from going remote is being reallocated to productivity and collaboration tools. Multinationals will routinely pay for all of Figma, Adobe Creative Cloud and Canva.
Additionally, designers are growing important as an influence in buying decisions. An increasing number of design leaders see allowing their teams to use their own tools as critical to attracting the best talent.
Note: The featured company report is a select section of the full profile—available on the platform.
Bet the story is forming but you’re still not sure? Cross-check your hunch with primary information.
Step 5: Enrich your data pool with a few more sources
A year ago, what were users saying about Adobe vs Figma?
Sacra's Interview with Matthew Moore, Head of Design at Lime, on Figma vs. Adobe—October 2021
Q: Can we start with roughly how many users of Figma or Adobe XD there are in your company?
Matthew: I'm the design director at Lime, and it's about 35 to 40 Figma users right now. Designers actively working in Figma at Lime— there's probably eight or nine of us. We're a pretty small team. Every designer, both products and brand design uses Figma. It's our primary tool that we're using now. Anything else that we use is almost in support of the work that we're doing in Figma. There's lots of reasons for that, but the multiplayer capability and being able to work on files together from anywhere in the world and not have to deal with sending files— sometimes maybe hundreds of megabytes or gigabytes—to each other is just a game changer. It speeds up collaboration and makes work so much easier.
Q: I know you were at Uber before, so could you talk broadly about what would make an enterprise customer decide if they want to pay for Adobe XD or Figma or any other designer tool that provides real-time collaboration?
Matthew: I'll answer that question a little bit more broadly. I was at Uber from the end of 2013 to the middle of 2018, and during that time we went from primarily using Photoshop to do product design and UX design to transitioning to Sketch. The whole company was essentially on Sketch, and then Figma came out -- I think it was probably 2017 when we really started talking about it. One of the designers that I was working closely with, his roommate was one of the founders of Figma and he was really excited about it, but it was way too early for the product. Things were working well in Sketch at that point, and there was no reason to switch. So we set a monthly calendar reminder to see if Figma had evolved to the point where we could actually use it. The next thing we knew, other parts of Uber had started using Figma and we were kind of the last team to get onto Figma.
Figma was right to take this approach of—get the designers onto it, don't worry about your IT people, worry about the end user. Are they excited about this product? Do they see the benefit of it? And we totally started to see the benefit of it at Uber. I left Uber and went to Sonder. They were on Sketch, sending hundreds of megabytes of Sketch files around. And I was like, "No, we're not going to do this, we've got to switch to Figma." I did a similar thing when I came to Lime.
I would say that approach was wise for Figma to take. From an IT administrator's perspective, if you have an unopinionated group of end users, then they're going to go with what is available or low cost to them. These companies are still giving designers access to Adobe Creative Suite. I actually just checked it out—I have access to Adobe XD as a part of my Creative Suite subscription at Lime, but I don't have it installed and frankly, I know no one who uses XD right now.
It's probably indicative that I know so little about it. I believe it does not have multiplayer capability. I believe it's not web based. I believe that you have to send files around to people and -- I'm sure they have some Adobe cloud solution that works sometimes, but my experience with the Adobe cloud system is that it's not particularly reliable and it's not a very generous product for the users.
If we were going to try out XD, there would probably be a lot of friction, which has a cost. We've got to use the tool we feel most comfortable with, and that almost gets out of the way so we can do the work we have to do, and Figma is that right now. There's so much momentum behind it. The community is very fickle about the tooling that we choose, and Figma has a whole community behind it. I'm a big fan of what they're doing.
Q: Are Adobe and Figma competing for enterprise budgets, or do you see the overall budget for design tools just expanding?
Matthew: I would say it's the latter. To me, Figma replaces parts of Creative Cloud, but it's not 100%. Figma does not have a Photoshop equivalent. If I want to edit some images, Figma is not the place to do that. Then there are video tools: Premiere, After Effects. Nothing that Figma is doing today comes anywhere close to what those tools could do. There are some animation capabilities with Figma, but it's more focused on clickable prototypes. So it's not one-to-one. For many use cases, Figma can replace a product like Illustrator, especially when it comes to software design and whatnot. But I don't think it's a replacement for anything other than XD. It's complementary.
Note: only select sections have been featured above (read the full interview here).
...Meanwhile, what has Adobe been up to?
Step 6: Use the innovation portfolio tracking tool
Source: SPEEDA Edge Incumbent Innovation Portfolio
Note: Featured here is a relevant section, and does not include all of Adobe's interactions with emerging technology spaces to date.
What else has been going on in the design tool space?
Step 7: Analyze in context using macro patterns from the remote work tools industry hub
Source: SPEEDA Edge Remote Work Tools Industry Hub
You have the information, the big picture, the publicized intentions, customer voice, expert insight, AND evidence of actual events...
So, what’s your take on the story now?
Get in touch with us to know more!
Featured companies
Figma
Figma is a cloud-based collaborative design platform that allows teams to work together on a virtual canvas to visualize and create new projects in real time. It offers a range of features, including sticky...
HQ:
San Francisco, CA
Funding:
USD 748.6 million
Adobe
Adobe is a software company that provides its users with digital marketing and media solutions. Its tools and services allow its customers to create ground-breaking digital content, deploy it across media...
HQ:
San Jose, CA
Funding:
USD 2.5 million
