In this episode of the Biz Doc, Tom Ellsworth talks about the current social media market share and how teens are interacting online. Keeping it mobile, this week’s case study is about Figma, one of the leading tools used to design mobile apps and websites. Figma has recently been in the headlines after the anticipated acquisition by Adobe fell through…allowing Figma to bring home ONE BILLION dollars as a consolation prize!

Figma is a software application for developing apps that was recently poised to be acquired by Adobe for $20 billion. But the deal collapsed when Adobe could not find a way around antitrust laws in Europe and the UK.

Figma was created in 2012 when Brown University computer science students Dylan Field and Evan Wallace teamed up and received a $100,000 Thiel Fellowship. In 2015, they launched an invite-only beta version of Figma to see how it performed.

In 2016, Figma was released publicly and quickly became a beast of an app used in polls and other collaborative app features.

Venture Funding

In 2013, Figma received $3.8 million in seed funding from Index Ventures and tech investor Terrence Rohan. They followed this up with a $14 million Series A from Greylock in 2015—a really good Series A!

In 2018, they received $25 million as a Series B from Kleiner Perkins. Their association with this firm—which ranks among the most elite venture capital firms with Sequoia Capital and Benchmark—dramatically increased their prestige. Then, what do you know, they acquired $40 million from Sequoia in 2019 as their Series C.

One year later, they received a declaration that their valuation was $2 billion. They also received $50 million from Andreessen Horowitz in a Series D.

In May 2021, their valuation went up to $10 billion.

DAMN!” Biz Doc says. That’s quite the valuation!

At this point, Figma also received a $200 million investment from Durable Capital Partners as their Series E.

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Adobe was getting run out of town—and they took notice. Many app companies used Figma, proving the truth of their slogan “How you design, align, and build matters. Do it together with Figma.” How does Biz Doc know? Because Valuetainment’s app Minnect uses it!

Adobe Gets Interested

On September 15th, 2022, Adobe announced an agreement to acquire Figma, putting up the price tag of $20 billion in cash and stock. The market reacted harshly to the news.

Criticism immediately ensued on the grounds that such a combination would violate antitrust regulations, as Adobe also publishes Adobe XD (which was suffering in market shares). It was compared to Facebook’s acquisition of WhatsApp, which was executed to prevent it from growing into a competitor. The US Department of Justice started an investigation into the matter.

A European Commission investigation was launched into the Figma-Adobe deal, and in early 2023, a report came out that the European Union (EU) would likely block the merger.

In late December 2023, Adobe said there was “no clear path” toward antitrust approval in Europe and the UK. The European Union is more concerned about monopolies (and is more socialist) than the United States, but Adobe wanted to sell in Europe. So, it reasoned that it could not spend $20 billion just to get rejected in court.

In return for their troubles, Figma received a $1 billion breakup fee from Adobe (5 percent of the original $20 billion price tag). But Figma’s team was disappointed, as they expected an “acquisition bonus.”

There are also rumors that bankers have been seen in the lobby of Figma because they want to facilitate “private placement,” which means making Figma shares available to people who see how valuable Figma is, and want to invest. If employees of Figma want to sell their shares to private buyers, they would be allowed to do so.

Meanwhile, Adobe has $6 billion in cash available for other things, which they had previously earmarked for Figma. The market speculates they will purchase some AI plugins or buy back their own stock to improve their price-earnings (PE) ratio.

Adobe is walking away with more knowledge of Figma’s inner workings, which is now its competitor…but Figma is walking away with a war chest of Adobe money.

Biz Doc’s Takeaways

Be brave and bold – disruption happens all the time. The guys at Figma were confident with their idea and they knew it would catch on. You never know where it might end up…

Always think big – when Patrick and Tom talk about a business idea now, they don’t even consider it if it doesn’t begin with a “B.” Chase high mountains.

Regulators are real – the governments of the world have regulators that won’t hesitate to bust you up if they sense a monopoly. But that’s only if you’re lucky enough. Remember: if they’re trying to bust you, that means you’re very successful. Just go about mergers and acquisitions (M&A) legally and you will have nothing to worry about.

Funding can do more than provide capital – funding can set the size and perception of a market leader. It is a form of validation.

Shane Devine is a writer covering politics, economics, and culture for Valuetainment. Follow Shane on X (Twitter).

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