Decoding the $20 Billion Acquisition!

2015: Figma launched in beta to make design collaborative and accessible ??

2022: Adobe acquires its biggest rival “Figma” ??

Let’s decode why would a giant like Adobe pay such a steep?valuation for Figma in times of ongoing recession and how the answer lies in the Product-Led-Growth that Figma has intensively worked on!

Quick Context ??

Last week, the IPO-bound company, Figma was acquired by the giant Adobe at a whopping 2.1X valuation of $20 Billion. That being said, this acquisition by Adobe isn’t one of the firsts. Valued at a staggering $145 Billion, Adobe has a huge portfolio of purchases with the likes of Marketo, Macromedia, Omniture, Magento, Workfront, Frame.io, Fotolia, Neolane, TubeMogul, EchoSign, and? Behance. ?

Why would a tech giant like Adobe buy Figma? ??

Just because Figma's their rival or there’s more to it…

One-liner: Adobe can’t become Figma. Hence they went with the “buy” rather than the “build” approach to this.

Deep Dive:

Both Figma and Adobe offer the same utility to a user. Technically, everything that a user would want to do with Figma, can be done using Adobe Apps as well. Then where's the difference?

1. Platform: The fact that the user is offered the same utility with Browser or App as a choice, played out in the long run for user persona who use laptops that cannot sustain the heavy Adobe apps. Browser accessibility as a feature highlights the founders' clear understanding of the user pain point.
2. Collaboration in design: Design is collaborative by nature. Especially product design. Figma brings collaboration to design. With Figma, it is "easy to collaborate, build and share". Today, whenever a user shares the file access, it always comes to the mail address where it was intended to be shared, in addition to that, anyone who doesn't have Figma installed can access the file and work on it.
3. Low Barrier to get started: This versus Adobe where just to get started the user needs to go through the tedious and mandatory process of app installation. Today even a layman can get started with Figma and work with it by going through a YouTube Video.
4. Pricing Strategy: Figma has been strategically priced in a 4-tier pricing structure: free, $12, $45, and $75. All per editor, per month.

For big design teams, Figma provides the $45 tier plan for organisation-wide libraries. If security and support are your priority then, then you move up to the $75 tier. Stunning is how Figma came up with tiers and compelling product features for each of them, that make it worthy for the target user group to upgrade.

The Figma Cycle of Pricing:

Millions of users sign up(as it is essentially free) => Get addicted to Figma => Work in a team => Signup for the team plan => Their employers pay for it.

5. Successful Product Launch: Figma's launch of FigJam marked its entry into brainstorming software making it a direct competitor with Miro and Invision.

Well, with the differences figured, the question is if these differences are so visible why wouldn't Adobe work on implementing it themselves and instead shell out $20 Billion from their pockets?

Because Adobe can't.

Explaining this in detail would be beyond the scope of the article, but it has been explained in detail by Amal Dorai in his tweet, who worked in LiveLoop before it was acquired by Microsoft. LiveLoop was working on making MS Office collaborative, and to a certain extent, Office Suite has improved post the acquisition.

A summary of the tweet: Three reasons

1. Structure of file: A file-based application like Adobe Photoshop has a multi-thousand-page specification, which is not designed for multi-user collaboration. In order to enable real-time collaboration, the file format would have to be changed, which is not possible because older versions of Photoshop would not be able to access the new file format. Multiplayer applications like Google Apps and Figma avoid this issue by entirely rejecting the concept of the file. Users of file-based applications often have workflows that are based around the file, but with a multiplayer application like Figma, workflows can be enabled with a developer API.
2. Backward Compatibility: Legacy desktop applications (eg: Adobe apps )are sold as "pay once, run forever." This means that the world is running multiple versions of the application, with each version having its own back-end and code. This creates a huge problem for software companies: if they add something new to the application, they need to make it backwards compatible with all of the previous versions. This can be difficult, as it means adding new features to the application that are not well-supported by the community. It's essential to deliver multiplayer apps (eg: Figma, Google Docs) over the Web or in a desktop container, where everyone is running the same code.
3. Technical debt: It is extremely difficult to add multiplayer capabilities to an app that was not originally designed for it. Legacy apps have a vast number of possible interactions that need to be defined and implemented in order for them to work collaboratively.?It is easier and cheaper for Adobe to use Figma's architecture to rebuild all of their existing applications than to try to make any of their existing apps work collaboratively. Multiplayer collaboration is the future of all applications, and Figma is by far the richest multiplayer collaborative app.

Why would Figma even agree to the concept of acquisition? ??

Currently, the public markets don’t seem to be fertile enough for any company to IPO and the founders and board couldn’t say “NO” to the deal which was a huge(2.1X) jump from their previous valuation of $10 Billion.?Additionally, it stands to benefit from Adobe's expertise in imagery, video, vector and 3D.

How did the stakeholders react? ??

1. Adobe’s side: Adobe is a listed company on NASDAQ, and the news of the acquisition was not accepted well, especially the steep price being paid. The investors clearly showed their displeasure, leading to a $30 Billion drop in market value.

2. Figma’s side: Figma has its own niche set of users and the entire perception of Adobe-Figma is similar to an old powerful veteran and some rebel who is constantly challenging the veteran because of its product. And these users were mad and expressed their discontent in clear ways through social media.

What's next? ??

Is the story over for Figma? Will it be made paid for all users? Will the education plans be taken down by Adobe? Or will there be a seamless integration between Adobe Suite of apps and Figma?

A TLDR of Figma's all hands Twitter Spaces:

1. Figma will remain autonomous.
2. There are no plans to integrate Figma into the creative cloud.
3. The focus would stay on Figma, and the plan is not to get distracted.
4. Figma-Adobe merge is not going to be instant.
5. Adobe's expertise plays an essential role in helping Figma tap into imagery, video, vector and 3D.
6. Nothing will affect the Figma Community program, and it is being planned to expand it further.
7. Free plan is not going anywhere, it is to stay.
8. Education plan is going to be free forever.
9. Design Tokens are under development, sneak peek is expected later this year(2022).
10. Major update for illustration on Figma-on the way.
11. Major update for developers-on the way.
12. No clarity on Adobe products integration with Figma.

Dylan Field said "No one pays $20 Billion to kill something"

With the purchase of Figma, Adobe has entered a new world without having to construct its way there.

That's all for now folks! ??

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