Adobe has agreed to buy design software company Figma for around $20 billion, sending a jolt to an industry that has been one of the hardest hit by the tech selloff that began in late 2019. last year.
San Francisco-based Figma, which was founded in 2012, enables software developers and designers to collaborate remotely and design everything from slides for presentations to user interfaces on mobile apps.
Along with Australian start-up Canva, it’s 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 posing 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 double Figma’s value in its last private funding round last year and 10 times its valuation in 2019, despite the recent collapsing software stocks. He values the company at 50 times its annual recurring revenue, which Adobe says will top $400 million in 2022.
Acquisitions at multiples of 50 times revenue and above were common in the software boom that peaked during the pandemic, but multiples for most companies have fallen back below 20 this year and acquisitions have become rare.
The big premium contributed to a sharp decline in Adobe’s stock price early Thursday, which was triggered by a cautious earnings forecast from the company. The pessimistic projection erased 16%, or $28 billion, of its value.
“People in this environment ask, ‘Why big deals?’ There are questions,” said Shantanu Narayen, chief executive of Adobe. But he said Figma would be a “transformative” deal for Adobe and that its browser-based approach and collaborative tools would boost the overall app market. ‘company.
Index Ventures partner Danny Rimer, who claims to be Figma’s biggest 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 “scholarships” a year more than a decade ago after deciding that the best scientists and entrepreneurs were wasting their time pursuing a traditional university education.
The idea that sophisticated design tools could be delivered in a web browser was widely dismissed when Figma started, Field told the Financial Times, adding, “Literally, nobody thought we could do it.”
According to Constellation Research analyst Liz Miller, the company’s web tools would give Adobe a better shot at envisioning “a more modern, cloud-based, composable, and open future” that opened up to design software.
The merger will allow Figma to bring Adobe’s imaging, 3D and video capabilities to its platform, Adobe said. The company is looking to tap into the millions of customers using Figma, which has seen a boom during the pandemic as staff worked remotely. Its clients include Twitter, News UK, Google and Netflix.
In its third-quarter results announced Thursday, Adobe reported net income of $1.1 billion on revenue of $4.4 billion, up 13% year-on-year or 15% at currency. constants.