Figma Grew Fast Even as Executives Failed to Clinch Adobe Deal

Still, Figma isn’t worth nearly what it was when it agreed to sell to Adobe in September 2022. Figma could be valued as low as about $9 billion—below the valuation of its last private round of funding— if investors assess it at the same multiple of its annual recurring revenue as that for Canva, a larger, more consumer-focused privately held design software company. Investors last valued Canva, which had nearly $2 billion in ARR recently, at about $25 billion in a large secondary sale this year. Figma, however, focuses more on the corporate market, which means investors may value it more highly than Canva, which is focused more on the consumer market.

A Figma spokesperson declined to comment.

Figma is considering lining up investors to buy some shares from employees in a secondary offering in the coming months, although it would likely be at a lower price than the $20 billion Adobe was going to pay, one of the people said.

Joel Flory, founder of photo- and video-editing startup VSCO, said getting Figma employees “back on the grind” after losing their chance at a big payday would be essential for the company. “You hopped off a merry-go-round spinning around really fast. Now you have to hop back on it,” said Flory, whose company uses Figma’s software for its internal design tools.

An IPO would likely be at least a year out. The company doesn’t have an IPO prospectus drafted, nor has it taken crucial steps toward a listing such as hiring bankers for a deal, the people said. Figma’s adviser on the sale, Qatalyst, doesn’t handle IPOs.

People close to the company said employees, executives and investors had been seeing the writing on the wall for months indicating that the deal would die. The acquisition fell into the crosshairs of the United Kingdom’s Competition and Markets Authority, which said it was considering blocking the merger or forcing Figma to sell off its biggest product, Figma Design. The European Commission also challenged the deal. In the U.S., the Department of Justice was also weighing whether to block the deal, according to media reports.

Under the terms of the deal’s ending, Adobe is paying Figma a breakup fee: $1 billion of new cash. It’s generous—at 5% of the deal’s size, it’s more than double the size of breakup fees in large deals, according to investment bank Houlihan Lokey. The fee is three times the amount Figma raised from venture capitalists.

That adds considerably to the hundreds of millions of dollars already on Figma’s balance sheet, a person familiar with the matter said.

Figma started winning over professional software designers when in 2016 it unveiled web-based design products that allowed instant collaboration and editing, in contrast to older software, which users typically had to download onto a computer. Adobe discontinued its rival offering, Adobe XD, as a stand-alone product last year.

Designers often criticized Adobe over its clunkier software and difficult-to-cancel subscriptions, and many had voiced concerns about what Adobe’s acquisition of Figma would mean for the product. As a result, some critics were happy that the deal was dead. Ian Styles, founder of the brand agency Styles+Partners, said he prefers Figma as a standalone company. “The Adobe monopoly has stifled the development of creative software for too long,” he said.

However, Figma’s venture capitalist investors now have to wait longer for potentially lower returns. The Adobe buyout would have been a blowout win for Figma investors Greylock Partners, Kleiner Perkins, Andreessen Horowitz and Durable Capital Partners, The Information previously reported. Index, Greylock and Kleiner Perkins each had stakes worth more than $2 billion on paper, after accumulating stakes of more than 10% of Figma. Those returns have now likely taken a hit.

The foiled deal has broader implications for startups and venture capital firms. VC firms have struggled to return capital to their limited partners because regulatory threats helped quash mergers and acquisitions, and the IPO market was stagnant.

Semil Shah, founding general partner of early-stage VC firm Haystack and a Figma investor, said the deal breakup would have a “chilling effect” on potential acquiring companies looking to buy startups. That would in turn curtail startup investments by venture capitalists.

“Capital is going to be stranded longer,” he said, adding that investors could also tap the secondary market to sell their shares. “Even if you invest in something like Figma, one of the best software businesses created, you can’t exit from it. It’s going to put a chill in a lot of things.”