Adobe acquires Figma

I’m up in Seattle to watch my Washington Huskies take on Michigan State. It’ll be my first time back to Husky Stadium since the pandemic started and I couldn’t be more excited. I love Seattle and would definitely live here again one day. Great food and great people. It’s not lost on me that raising a family is much easier living in Seattle than it would be in San Francisco despite being an expensive city as well.

The biggest news of the year when it comes to startups hit the tape yesterday as Adobe announced they were acquiring Figma for $20B. This is a huge acquisition and a big premium at 50x ARR. I read a few places that this is the largest private company acquisition in history and this is the highest multiple granted to any acquisition.

The street didn’t like it as Adobe stock has tanked more than 20% since the announcement. Personally, I saw this as an amazing buying opportunity and bought some shares today.

My hypothesis is that the street doesn’t like the acquisition as they view it as expensive and rich, but they also do not understand it either. Figma is an amazing product that is universally loved by all designers and product teams.

Figma is built to be a multiplayer collaborative in-browser tool which is made directly to combat Adobe’s weaknesses in their product suite. Adobe Illustrator and other products are not in-browser and teams cannot collaborate on something at the same time. With the way these products are made, you cannot just convert them into in-browser multiplayer tools.

With the acquisition, Adobe has just eliminated their biggest threat to their existence. Figma has been a thorn in Adobe’s side and has been eating their lunch for years now. Their 100% YoY growth shows that. Adobe felt threatened and saw that the only way to address this was to acquire them with an offer that was too good to pass up.

This acquisition has potential to be Adobe’s Instagram. Similar to that, people thought Facebook was crazy for buying Instagram for $1B. Nowadays, that was a steal of a deal.

In the long-term, I see this as a huge acquisition for Adobe and I am long Adobe.