Figma's Acquisition by Adobe: Is it Due to Market Share?

 In 2009 we built a SAAS project - intended for Israeli lawyers in the field of torts - nezikist. When we needed a design, we turned to a designer who used Photoshop software.
10 years have passed. We developed another project, Equitest - AI Business Valuation software, allowing anyone to value any company without prior knowledge.
When we needed a dashboard, we turned to a designer. They requested that the design be done using Photoshop software, as we believed this was the standard.
To our surprise, we found very few designers who used Photoshop software. When we tried to understand why - we were told in simple words - because no one uses Photoshop today, everyone uses Figma for design. So we hired a designer to design a dashboard for us using Figma.
The resulting dashboard was a success story. Very sophisticated and makes it possible to carry out valuations in a friendly and fast way.
Pigma is an online platform that allows product and user experience designers in high-tech companies to develop interfaces and share them with the other officials in the company.

Several months passed. In September 2020, Adobe, the developer of Photoshop, announced that it was acquiring Pigma for $20 billion.

Pigma is an online platform that allows product and user experience designers in high-tech companies to develop interfaces and share them with the other officials in the company.
The multiplier it embodies for Figma is considered relatively high - 50 times the revenue.

The purchase at a high price makes it possible to understand two basic things about the valuation of companies. The first thing is related to the multiplier. People unfamiliar with valuation faucets often believe that the correct way to estimate value is to use one of the multipliers - profit multiplier, sales multiplier, or equity multiplier. Well, the answer is absolute no! A company like Figma cannot be valued using a multiplier. A profit multiplier is helpful for companies whose profit is more or less constant. A sales multiplier benefits losing companies, and an equity multiplier is valuable for financial entities. None of the situations match the situation that Figma is in.

The second thing is related to the reason for the purchase. Many times a company acquires another company because of the high growth rates of the acquired company. These growth rates can be a growth engine for the acquiring company. In the case in question - it seems that the reason for the purchase of Pigma by Adobe was a fear of losing market share. The Adobe company used Photoshop software to dominate the design market for many years. In the years preceding the acquisition, Pigma's market share kept growing. At the same time, Adobe's market share was getting smaller and smaller. Therefore, the purchase may be due to the fear of Adobe's loss of market share.

Conclusion

This article discussed the acquire of Figma by Adobe. Suppose you look for a straightforward way to evaluate your business, manage your cap table, or create a pitch deck. In that case, you can try our intuitive ai based business valuation software or our business valuation calculator, or you can contact us for free advice or schedule a demo.