Prior to announcing its intent to buy Figma for $20 billion on Thursday, Adobe’s largest deal was its $4.75 billion Marketo acquisition in 2018.
Why go so far outside of its pricing comfort zone and pay twice as much as Figma’s most recent private valuation? The easy answer is that it’s about taking a potential rival off the market. Yes, Adobe XD is a similar product, but there could be more to this deal than simply playing defense.
It could be that — like IBM buying Red Hat for $34 billion in 2018 or Salesforce acquiring Slack for almost $28 billion in 2020 — Adobe’s executive team saw a company that could fundamentally alter their organization.
For IBM, the Red Hat acquisition was about the hybrid cloud. For Salesforce and Slack, it was the digital workplace, but both saw a shift coming in their markets and made a huge offer for a key company to get ahead of it. Both also kept those pieces independent with the existing CEO in place (more on this later).
Perhaps Adobe saw the Figma deal as its organization-altering moment as it watched the creative market making a key change from one centered on creating assets with tools like Photoshop and Illustrator to one firmly focused on the creators themselves and the collaborative nature of the design process.
The former is where Adobe has built the bulk of its business. The latter is represented by Figma, a startup with visionary founders who wanted to change the way people thought about design in a digital context, a change so important that the old-guard company was willing to overspend to grab the young upstart and bring the two ways of thinking together.
We spoke to folks from the companies involved, Figma investors and industry analysts to get a sense of why this deal went down. The bottom line is that there were lots of reasons, but perhaps the best one was that Figma and Adobe think they’ll be better together.
The vision thing
One of the primary reasons that Adobe turned its attention to Figma was because its founders, CEO Dylan Field and CTO Evan Wallace, had come up with a fresh way of thinking about the design process — and that vision had great value.
John Lilly, a venture partner at Greylock, met the Figma founders before their seed round circa 2013. He ended up investing in the fledgling startup’s Series A round in 2015, before it even had a product.
He said what stood out in the early meetings was the pair’s design knowledge, their intelligence and their vision about where they wanted to take the company, especially for guys who were in their early 20s at the time.
“Mostly, it was Dylan and Evan, their confidence and their love of design,” Lilly told TechCrunch. “They were so design-native, they could take lessons [about building] community that we’d learned over the last 20 years on the internet. My background is from Mozilla, before Greylock, and it’s all about community and community growth, and Dylan could see that stuff and see those patterns and how to think about those in design.”
He said they began discussing how to take the notion of the developer community built around Github and apply that social coding idea to design. That collaborative and community element turned out to be a real differentiator for Figma.
In fact, Gartner analyst Brent Stewart thinks that the platform Figma ultimately created has grown into the most essential design idea out there, one that catapults Adobe from the creation tools business into collaborative design.
“With the purchase of Figma, Adobe has acquired the single most important design tool on the planet (yes, I mean that literally). The overwhelming majority of professionally designed and engineered digital products in the world began life in Figma,” Stewart said.
“Prior to this acquisition, Adobe’s Creative Cloud had become relegated to creative utility status, dominated by age-old stalwart titles such as Photoshop and Illustrator that are capable only of incremental growth. Now, after 12 years of fast-follower status in the digital product design platform category, Adobe owns the market’s dominant platform, as well as an emerging player in the visual collaboration market with FigJam,” Figma’s online white-boarding tool.
Forrester analyst Sheila Mahoutchian agreed with Stewart’s assertion that the deal could be a transformative acquisition for Adobe if it handles it right. “The acquisition of Figma by Adobe represents a future-forward strategic move on Adobe’s part to stay adaptive and responsive to designer needs. Figma’s best-in-class collaboration workflow platform has changed the landscape for design tools, moving the world of design from individual contributors to collaboration-based team enablement,” she said.
Scott Belsky, Adobe’s chief product officer and executive vice president for Creative Cloud, landed there when his company, Behance, was acquired a decade ago. He understands the delicate balance Adobe needs to walk here, but he also sees two companies that could benefit from coming together.
“Every interactive digital experience that we use every day contains assets — images, videos, animations — and guess where those are made. Well, those are made in tools like the ones we make. And you don’t have to be a rocket scientist to get excited about the idea that the product platform that builds this interactive product design or interactive product experience, being connected to the assets and the tools that make the assets, can actually unlock a lot of productivity for the product designer,” Belsky said.
Maintaining independence
The first rule of the $20 Billion Acquisition Club: Don’t mess up a good thing. Certainly, the consensus among designers on social media was at best concern and at worst contempt when they heard about the deal. (After all, there is a history of big companies buying smaller firms and then strangling them, on purpose or otherwise.)
The companies will have to prove that the purchase won’t change what designers love about Figma or stifle product innovation. CEO Dylan Field believes that he can continue to build the company the way he envisioned it, but with more resources from being part of a larger organization.
But he stressed that one of the keys to the deal was staying independent; his title will remain Figma CEO. This follows the playbook that IBM and Salesforce have adhered to, keeping independent CEOs in place after being acquired while letting the companies run the way they always have. It appears that Adobe intends to do the same.
“The more I’ve gotten to know the members of the Adobe team through this process, the more impressed I’ve become; the more I felt that they will be able to understand the challenges that are ahead of Figma and help us navigate them more gracefully, while helping us continue grow as fast as possible but be autonomous and continue to operate that way. So, I’m really excited. I think it’s kind of the best of all worlds,” Field said.
It will certainly take a light touch for Adobe and Figma to pull that off.
But this is a big deal for Adobe, and Adobe CEO Shantanu Narayen certainly understands this. While some analysts in the call after the announcement were skeptical about the price and time to value, Narayen tried to make clear what the value proposition was with this deal.
“When we think about the future of what’s happening with creativity, and in a sense, what’s going to happen as it relates to multiple people engaging in that with respect to collaboration, we just believe that this is going to be an incredible value and a way to attract a whole bunch of new customers to the combined platform,” Narayen told analysts.
What he means is that by combining the two companies, Adobe can reach a much broader audience. “When you think about Adobe, certainly we target knowledge workers, we target communicators, we target creative professionals. Figma really focuses a lot also on developers; they focus very much on the other stakeholders, who are involved in the product design process.”
For Field, it comes down to executing now and proving to his core audience that this move is a positive one. As we ended the call, he was about to meet with employees to discuss the deal for the first time, and he was focused on the future.
“We know that now it’s our job to show up and really build. And so I think that I’m going to tell the company in a few minutes how I think that this is potentially a point where people will look back as an inflection point. We’re going to be moving faster after [the deal closes] than before. And now it’s our job to go do that.”