The deal was announced on September 15, 2022 for $20B. Some information from the deal announcement:
Consideration: cash and stock, half/half
Figma has a total addressable market of $16.5 billion by 2025.
Expected to add approximately $200 million in net new ARR this year, surpassing $400 million in total ARR exiting 2022
Net dollar retention of greater than 150 percent
Gross margins of approximately 90 percent
Positive operating cash flows
At $20B, there have been many that have called this the largest private tech deal to be announced. The Facebook/WhatsApp deal was $19B at announcement and closed at $22B. Also, Salesforce acquired Slack for $27.7B and Microsoft acquired LinkedIn for $26.2B. But both Slack and LinkedIn were public companies at time of acquisition. Also, Tanay Jaipuria mentioned here that Dell bought EMC for $67B and IBM bought Red Hat for $34B:
It remains to be seen where the acquisition price ends up. Adobe dropped 16.8% following the announcement and another 3% the day after. Given Adobe’s market cap, they lost more than the entire value of the deal. At a 50/50 cash and stock split, the deal is around $18.3B based on Adobe stock the day after the announcement. At $400M in ARR, the $20B acquisition price represents 50x ARR. The announcement says Figma will exit this year at more than $400M ARR, and some have speculated it could reach $450M ARR, which represents a 44x ARR multiple. By way of comparison, this account shows how the 50x ARR multiple compares against other public companies. As you can see, you can command a premium on the ARR multiple with high growth:
The timeline of the company is interesting. While Figma was founded in 2012, the first five years were spent building product. It started a private beta in December 2015, and the first public release was on September 27, 2016. David Sacks shared a slightly different timeline on the year of founding but is consistent that Figma began making revenue in 2017 with self-service and launched the enterprise tier in 2018.
Two things are striking. First, Figma took much longer to reach the typical milestones. It took three years to get to private beta, four years to launch, and only in year five did it start turning on revenue. Not that many companies have the luxury of having both capital and time. It’s usually one or the other. Second, once Figma began to turn on revenue, its revenue acceleration was ferocious. Sacks tweeted out a helpful visual on the revenue acceleration, and the ramp is breathtaking.
To hit $400M ARR within 5 years of turning on monetization is staggering. A prolonged 5-year R&D period paid off with an exceptional product. This article provides that feat in broader context:
“The average cloud-scale SaaS company books $10 million in revenue after about 4.5 years, according to Kimchi Hill. In the same study, assessing more than 72 SaaS companies that reached $100 million, only eight did so in less than five years from the first dollar — and that was precisely $100 million. Most take five to 10 years to hit $100 million, and well-known names like DocuSign, Coupa, RingCentral, and Five9, took 10 to 15 years.”
Given how quickly Figma ramped monetization, one wonders whether other companies could also achieve greater revenue acceleration if given a longer time to launch. My sense is likely not in most cases. There would be too many false positives given the number of failed companies that take too long to launch. Rather, the slow burn or late bloomer will be the exception rather than the rule. That’s ok for venture since venture is in the exceptions business.