Graphic design pioneer Adobe is acquiring the collaborative interface design startup Figma for $20 billion in cash and stock, taking an expensive bite out of its competition. Launched in 2016, Figma competes with Adobe XD, Adobe’s web and mobile interface design software, and has proven to be a useful alternative for developers at Microsoft and other companies. In its most recent funding round, in 2021, the startup was valued at $10 billion.
With financial backers including Kleiner Perkins and Index Ventures, Figma is expected to rake in more than $400 million in annual recurring revenue (ARR) in 2022. On the other end of the financial spectrum, Adobe has also announced record quarterly revenue in excess of $4 billion in Q3 of fiscal year 2022, giving it an ARR of more than $15 billion. The expensive acquisition may be less about today’s bottom line and more about the industry's future.
Such a gap between revenue numbers weighed against the $20 billion price tag for Figma may have startled investors, however. Adobe’s stock dropped roughly 17% in the wake of the announcement — its biggest drop since 2010.