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Why Figma Won: The Rationale Behind Adobe's Blockbuster Acquisition
How this upstart beat out the biggies in the world of design
Hey folks! 👋🏽 Kavir here. Welcome back to another edition of The Discourse. This time we’re discussing Figma.
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In what’s been an otherwise dark time in startup land, Adobe’s acquisition of Figma for $20B has been a silver lining. The first question that pops up is why did Adobe pay 50x Figma’s ARR of $400M for what’s just a design tool. There’s more to it than meets the eye.
I’ve been using Figma since 2019 and have been bullish ever since I started using the platform.
Combining my personal experience and drawing insights from essays, let’s take a look at how have design platforms evolved since 2015, what did Figma do to win, and what can other startups learn from this milestone in B2B SaaS.
History of User Experience Design apps
To understand what a big deal Figma is, you need to understand what came before that.
If you’re early in your career, you might think that online design collaboration using links was par for the course with tools like Figma and Canva. But that’s not how it was in 2015 when I started my PM career. The primitive for collaboration was the file.
In his thoughtful essay Arc of Collaboration, Kevin Kwok breaks down work into productivity (work being done) and collaboration (communication about the work). In the essays, he posited that Slack bested Dropbox as a better center of gravity work platform because in a pure cloud world, this atomic unit of files seems increasingly archaic.
With this in mind, let’s look at how design platforms have evolved over the years.
In 2015, my team used Adobe Photoshop for design (you wouldn’t even imagine this now) And it was as big a pain as you would imagine. Let me recount the horror for your benefit.
As a PM my role was to sketch wireframes and give those low-fidelity wireframes to the design team to convert into hi-fidelity designs. The design team was the only one who had Adobe licenses on their office desktops. This meant that there was a bottleneck on the designer for even the simplest of updates.
I recollect instances when I needed quick updates but the designer wasn’t available. As a workaround, I would edit a PNG export on and then overlay text onto the exported PNG, and not the common photoshop file. This led things to be out of sync.
Similarly for exporting, I had to rely on the designer to provide the latest export since they had the photoshop file. And same for prototyping.
Collaborating and giving feedback happened either in person or through back and forth on annotated screenshots. The former was more time-consuming and left room for misinterpretation or missing some points. The latter led to only one person collaborating with the designer instead of the entire team. All in all, a very poor collaborative experience.
In comes Sketch
Next, we moved to Sketch, which was an intermediate solution. Its core use was for user experience design, unlike Adobe Photoshop which was a swiss army knife of an app used by photographers, graphic designers, UX designers — you name it.
Sketch also introduced the concept of artboards and an infinite canvas. This was more suited to visual design work as you could see all the screens together. It was cheaper than Photoshop so multiple people could install Sketch on their laptops, so file editing wasn’t a problem.
However, it suffered from the same problems as photoshop because again the primitive was still a file. With that came issues of file versioning, true collaboration, minor changes, or exporting dependencies. The feedback loop was lenghtened as collaboration happened either in Invision, exported images, or live demos.
Then came Figma, which I started using in 2019 with my team. The best part was that it was free, browser-based, and could import Sketch files, shortening the adoption curve. And it was a 10x improvement over anything before.
Why Figma Won
Figma was multiplayer native right from the start. As opposed to Sketch and Photoshop, the functional unit was a link, and not a file. This meant that multiple people could design at the same time, file versioning ceased to be an issue, everyone could leave comments — leading to a much more collaborative experience.
In my experience, as the PM I could add comments myself, invite other stakeholders to add their comments, make minor changes to the copy, export files, and create prototypes. All without any one on the team being a bottleneck.
It was easy to bring everyone on the same page. This came at the right time, because during the pandemic collaboration in remote teams that were distributed globally become critical. Going from Sketch to Figma, felt like going from Microsoft Word to Google Docs in terms of collaboration.
Figma was fairly community driven when I started using the platform. They did this in a few ways:
The first was the concept of Design advocates. These were either prominent designers at top companies or full time designers who they onboarded to spread the gospel of Figma. It’s a form of influencer marketing that feels organic with incentives aligned.
The second was the internal Slack group, townhalls, and other events that the Figma used to organize. It brought about a space of belonging.
And the third which was arguably the most effective was the Figma Community platform launched in 2019. In founder, Dylan Field’s words —
“The Figma Community, releasing in beta, is a public space where you can now publish live design files that anyone in the world can inspect, remix, and learn from”
Instead of starting your design from scratch, you could use these templates to get a kickstart on the work. The times of files include wireframe kits, iOS and Material Design UI kits, you name it. I’ve also played my part and contributed a file on Design Heuristics which has got 1000+ duplications.
You can’t beat free. Figma being a private company was able to beat Adobe in pricing. It was free for individuals but paid for teams. Whereas Adobe Creative Suite is paid for by everyone. Figma has since limited the free plan to a certain number of files and pages per project.
Figma was also intelligent to make their product free for students. This creates a swathe of users that will enter the workforce only having worked on Figma and would take that to orgs that they worked at. Apple has similar student discounts to get people into the ecosystem early.
Why did Adobe pay so much
Adobe launched XD at the same time as Figma’s public release but it wasn’t able to capture the mindshare of users as Figma did.
Collaboration is what sets Figma apart. You might then ask, how difficult it would be to slap collaboration on top of these products. It turns out to be quite difficult. Amal Dorai founded LiveLoop and was tasked with making MS Office collaborative. His thread explains the problem in detail, but the core issue comes back to the file primitive.
Another reason is that Community is a moat. It would be very difficult to build the same community from sractch, and that’s what they must’ve faced with XD. Dylan Field hosted a community town hall after the acquisition to directly communicate with community members, speaking to the community-led focus of Figma. Not to mention the fact that Dylan Field is a generational founder and the Thiel fellow is capable of great things.
So what Adobe paid for was more than just the revenue multiple, which at 50x of ARR even with a 100% YoY growth seemed steep.
Adobe bought out the competition which could’ve been seen to be an existential threat to Adobe’s suite of products. Not only for XD but also Adobe Illustrator. David Freiberg in the All-in Podcast, spoke about this point that the acquisition was not only on revenue multiples, but it was also to safeguard its own future.
And as we touch upon in the last section on Future of Figma, design might just be the start. There’s a lot more possible.
Future of Figma
We only need to look at Canva to look at what expansions are possible for a design app. Canva recently launched a suite of products - Docs, Whiteboard, Video, Websites and more.
While I don’t think Figma would necessarily take the same route as Canva, Figma might be the starting point for all software development. We might see a lot of potential in Figma being able to integrate with development platforms (both code and no-code) to create apps.
We’ve seen the first level of this play out with tight integrations with Bubble, a visual development platform, where the design is done in Figma and the logic and workflow building in Bubble.
Another integration that is exciting is the Figma-Bravo Studio integration. Where you can build a native app using Figma designs as the base.
As you can see, we’ve just seen the first versions play out.
The takeaway for startups building B2B SaaS is to make your product multiplayer native, help your users achieve goals of both productivity and collaboration, cultivate community, appeal to younger users, and embed yourself into the workflows of users.
This was a great outcome for the Figma team, and hoping they stay autonomous within Adobe and continue innovating and being at the center of the future of software development.
Thanks to Russell Smith, Jeremy Nguyen, and Dhrumi Savla for providing feedback on the early drafts of this piece.
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