In a year that’s featured exactly zero high-profile tech IPOs and far more headlines about mass layoffs than big funding rounds, Adobe’s $20 billion acquisition of Figma on Thursday is what some might call a narrative violation.
There was no other bidder out there driving up the price, according to a person familiar with the matter who asked not to be named because the details are confidential. Figma’s cloud-based designed software has been a growing headache for Adobe over the last few years.
It’s cheaper (there’s even a free tier), easier to use, collaborative and modern, and has been spreading like wildfire among designers at companies big and small.
Annualized recurring revenue is poised to more than double for a second straight year, surpassing $400 million in 2022. “This was a significant threat to Adobe,” Lo Toney, founding managing partner of Plexo Capital, which invests in start-ups and venture funds, told CNBC’s “TechCheck” on Thursday.
“This was very much both a defensive move but also an eye towards this trend where design rules and design matters.” That’s why Adobe is paying roughly 50 times revenue following a stretch this year that saw investors dump stocks that were commanding sky-high multiples.
For the top cloud companies in the BVP Nasdaq Emerging Cloud Index, forward multiples have fallen to just over 9 times revenue from about 25 in February 2021.