Adobe - Figma Acquisition Failed! Too Good To Be True? | Figma Case Study

headlines this week about figma headlines about Adobe what's going on well let's dive into it figma design software if you've been part of a group that made a mobile app or maybe you were the customer or maybe there is an app redesign or a mobile version of your company website or whatever it is and you got a link for figma hey check this out let us know what you think and you add in your comments then you get on a zoom call and you see other people's comments and things moving around in real time that's collab oration and design support brought to you by figma and this company has been on a Rocket Ride since it was born brilliant concept let's dive into it and see what are those headlines about that said $20 billion Adobe wanted to pay but governments and Regulators said no that's exactly what happened but it's nobody's fault it's not figma's fault it's not adobe's fault it's just a regulator said both y'all are too big and would control too much of the market so let's see where the the story starts and bring you back to that point figma where it began this guy and his buddy ER at Brown this is Dylan field he has a good buddy named Evan Wallace they're studying compai at Brown they have an idea for this they go out they get $100,000 theal uh Fellowship from Peter theel to do it Evan Wallace I think is the one that finishes degree Dylan field doesn't Dylan comes out to get things moving that's where it got started with their vision for figma then 2015 they you know 3 years later they have a beta that's launched with a lot of work they put into it and it's invite only so in other words people could now use the software By Invitation Only similar to the way in the early days as kind of was with Facebook you could put yourself on a weight list and eventually you know you were able to use it but that's very common in software so that you can control how many people are use it but you can put real users on the ground and get real statistics and information back back about how it's working for them 2016 they made a public release of the software and they're off and running so within those four years they're driving but now what has happened in the seven years since they have built a monster that's really been driving so let's take a look at the Venture funding because my old board when I used to do it I would draw the Venture funding for you and this one it's a really compelling case so I thought we'd walk through it so they have the theal scholarship you saw in 2013 they got seed the seed round 3.8 million from index Ventures and Terren Rohan okay they take that put that money to work and two years later 2015 they do a series a of $14 million with Greylock that's a pretty good size series a then you go 2018 so three years after that they do a series B of 25 million Kleiner Perkins they now have index Greylock Kleiner Perkins you are going going up the food chain in terms of The Prestige and the capabilities of the Venture Capital Community there's nothing wrong with index there's nothing wrong with h Greylock but Kleiner per Perkins let's face it Benchmark Sequoia Kleiner Perkins that's the top of Mount Everest when it comes to venture capital 2019 a year later they do a series C 40 million Sequoia hey hey that's what I meant you know Kleiner Aquaria Benchmark you are now at the Pinnacle venture capital and you have got $65 million in about a year and a half from them you are a player how much so 2020 a year later they declare that you are a $2 billion valuation startup although now it's been about eight years since you started up since those days where you got the theal fellowship and you left Brown to go drive this with your friend and you rais $50 million from andrion horites take a look at this look at this pedigree of investors that is significant then 2021 a year later one year later $10 billion valuation in May well you know what I used to say I'm going to say it now there is a word for that and that is damn that is a lot of money that is a big stack of money but and it's a big stack of valuation and it's a $200 million series Z so you take a look at this Venture funding as it says up there $333 million from 2013 2021 over eight years and what were they doing over eight years making software that's phenomenal and acquiring users making it even better adding functionality to it and kicking the crap out of adobe who is now starting to lose market share on one of its Premier Products and don't think they weren't paying attention how do we know this is how we know you take a look at this product here's the collaboration you have a designer here a developer here people going over over and they're looking at these These are equivalent of phone screens and you have all these collaboration tools so if you've never seen it you should talk to a developer or designer out there that does mobile apps or web and say what do you think of figma and they're going to praise it for all the right reasons it makes it easy it makes it fast how do I know oh let me step back and tell you how you design a line and build matters do it together with figma that's their tagline so but we love it how do I know that they make this tagline come true with what they do simple we use it man the man uh app that allows people to connect if you're an expert you can go on man make yourself a profile if you're a user you can make a profile for yourself and then look around for experts such as the bisoc and Patrick B David and others and saying hey can I pay you for a half hour of your time 15 minutes of your time or for a text message or for a voice message and response I've got honest questions about life about my business I did T manex today 15 minutes each people asking about how to frame a series a deck for investors that they're going to be seeing this week another one was I've got enough money on my own I don't need investment right now but I have two family members want to put in should I do it now I said why don't you wait a little bit till you need that money and your company's worth a little more these are the kind of questions people get answered on man you go in there find somebody you want to ask it with send the question you pay for it the expert is paid answers the question text to text text voice too or live like a FaceTime and that's what we do and man was designed using figma here's an example of some of the new screens that are coming up and things that we're working on as we're constantly trying to make M better but this is us using figma so not only do I understand the company through my own bisoc research but we're a customer so what happens with all this great success and helping to design things like the greatest user expert connection app in the world in my opinion man what happens Adobe knocks on the door September 2022 hey aren't you the guys that makes that really cool software you know the stuff that things like manct are designed with yes we are we'd like to offer you $20 billion for your company immediate criticism followed Adobe XD many people thought that that was a little bit ancient and it was getting its butt kicked by figma fewer and fewer developer designers that I know of were recommend were saying that they were using XD more and more of them said they were using figma it was losing market share so makes sense that they would come to buy it now there were some people out there that said now wait a minute if you buy figma and you have XD you basically own the whole market and I'm not sure we can make that happen how is it that figma is going to keep becoming better and better after after you buy it or you just going to buy it and let it stay put and then you're going to go make sure that you can take care of um XD and and can keep making that to which Adobe said dude I'm paying $20 billion that's an awful lot of money to pay somebody to stop and said nonetheless people were concerned and this point was brought up well you know you wouldn't be the first person that bought a company to kind of prevent competition that's what Facebook did when they bought WhatsApp because what that meant was it prevented WhatsApp from growing into a competitor for Facebook's Core Business and they kind of stuck it on there just as a communication tool big companies have done this to little companies for a lot and and we want the consumer to benefit now whose voice am I speaking in I'm talking about the US Department of Justice looking into anti trust investigation February 2023 up topic the year being commission beginning an investigation into their EU merger laws those are the voices I'm talking about guess what that's like you see the the blue and red lights blinking in your driveway and you know the keg party's over the cops have arrived so here we go and the report comes out in early 23 that the EU will likely block the merger 23 was spent dancing back and forth trying to figure out if they could make the merger happen well what happens well let's take a look what happens to adobe's stock history during this dance when Adobe announced that it was going to acquire figma for 20 billion in cash and stock the market reacted harshly how harsh that harsh that is that is a bad day that is a yeah I'm not going to say what that is that is a trip to the prison shower and meeting a guy named bubba this your stock suddenly takes a crash and here it is stock dropped 177% $100 in 17 days cuz you have to take a look at what that line is at the bottom that line at the bottom is $300 a share that's not zero the Adobe stock is trading right now at $5.99 so it goes you know from um what was this I think this was 389 or 400 all the way down to sub 300 and look at that that is a straight straight drop down you know you hear the the um you go on a roller coaster and goes click click click click click click click click click click click and at the time goes over the top and all a sudden everybody starts screaming that's what that is but the people screaming all worked for Adobe so they see what's going on but they kept turning in good results and they've been working for the year and having good quarters and it comes all the way up there meanwhile in the background you know the regulator said we're not going to let this happen so what do they have to do 15 months after they after September 22 when they said we're going to do it it's over and here was the headline there's no clear path to regulatory approvals from the European commission and the UK's competition and Market Authority they're more sensitive about capitalism and mergers to create you know um monopolies and groups they're more sensitive about that than United States is and so and they're also more liberal and more socialist they said we're probably never going to give you approval adobe's like I can't pay $20 billion not to get approval so here it is December 18th which would be yesterday ladies and gentlemen Adobe and figma call off20 billion acquisition it all starts coming out Adobe terminates the deal for figma both firms say there's no clear path for regulatory approval we're done here and then figma's CEO even says he laments demise of the 20 billion deal with Adobe he thought it was going to be good for consumers single source and things like that regular Regulators saw it differently so fig figma do anything wrong Adobe didn't do anything wrong it's just they're like we can't let you two get together together you're too big and too powerful uh we don't think that would be good and we don't believe you when you say that the consumer would get more we think it's good for you too to be competing and the consumer will get more because you compete the answer is no so now what so what now well figma guess what they got a billion dollar breakup fee other words when Adobe said we're going to buy you there was a 5% breakup fee in that that said if the 20 billion dollar deal didn't go through they would get a breakup fee so figma gets a billion dollars here's a billion dollars for doing what for struggling all year trying to get acquired also they had a disappointed team these people have been working since 2012 working their butt off they wanted to see the merger was going to give cash and stock for their stock in other words they were going to get some cash that's pretty nice especially if you've been there for many years and you've got a little juice in the game and give you some stock so as Adobe keeps going up and it's all the way to 599 right now you're going to be part of that helping the stock go up so if you'd been there a long time and you're an early player this is a real not a windfall this is the kind of return in a startup environment under a capitalism platform that you freaking deserve for working all those late hours those late nights to get there now they don't get it hopefully the billion dollar breakup fee makes bonuses for the company that said hey you built a company worth buying we're going to take some of this and give you bonuses don't know but there is rumors out there that Bankers have been seen in the lobby of figma and not because they're designing an app they are there because they want to be the one that facilitates private placement now what does that mean it means hey a lot of people see how valuable figma is and they'd like to invest we don't need any more money we just got a billion dollar breakup fee and we got all that other Venture Capital money and we're profitable and we're making tons of money they said well wait a minute what if they wanted to buy maybe a few of the shares that belong to some of your investors or employees would you let them sell this is called the private placement so a private placement you now as a you know maybe a long-term engineer been there eighty year maybe you've got $2 million worth of stock all of a sudden you'd be happy to sell half a million of it pay your taxes on that maybe pay off student loans because payments have started on those again another story entirely or you just say hey I'll use it on a down payment a house hopefully you don't live in California anyway never mind you just get some money you can do something useful with it pay your taxes and do something with it and then leave a little on the table this is what private placement allows allows other investors to come by part of the company it allows people in the company to sell some off but the company doesn't have to take any more investment from the outside because the number of shares are available before the private placement is equal to the ones after it's just instead of me having $2 million worth of it as an employee let's say I I'll have a million and a half and some other investor now has my half a million and they want to see the company go and go public that's what they're all going to be thinking they want to see figma go public because it's pretty clear that the one company that was out there was going to be able to buy them wasn't allowed to now does this mean that somebody else wheels up to the table and takes a swing at it maybe all could also could mean that figma takes some of that breakup fee maybe they buy some smaller utilities to go with figma the point is figma's in a great position they didn't do anything wrong they built a great company and now some of their if this is true about private placement some of their employees are going to be able to get a little bit of juice take a little off the table as a result of this uh situation here which they deserve in my opinion meanwhile Adobe Adobe has six billion in cash available now for other things that they were going to give to figma well the market is out there speculating maybe they should be buying some m& m&a targets maybe they should be looking at some AI plugins for their Adobe suite of things let's see you know we'll see if that's what they do and they also said maybe we'll just buy back some of our own stock on the stock market and change the PE Ratio a little bit more positively stock BuyBacks do that by the way nowadays so both of them end up in a win position specifically because Adobe ran a good business and they got out there to the end and their stock is actually risen over the course of the Year following that screaming roller coaster plunge they took when they announced everybody hey hey guess what I'm going to buy figma for $20 billion what do you think and the stock market goes wow hang on well now it's all come back and it's probably going to be a happy ending for everybody except both of these folks are now competing and Adobe has more knowledge of figma to use to compete with but figma's got now a little war chest to go do some things with that's what's going on so what are the lessons for you and me what can we learn from this well first of all be Brave and Bold disruption happens all the time time the guys at figma saw an opportunity to build a product that was great built a great product people started adopting and using it and thought this is Best in Class for designing apps and for Designing things and it gives us collaboration fantastic Be Brave and Bold you never were never know where it might might have you end up you know and always think big think big about it don't think small this could be a million-dollar company no say how can this be a billion dollar company you know when Patrick and I talk if it doesn't start with a B right now we don't look at it we're actually not interested in it we want opportunities that start with B's because it's high leverage and we want to take the footprint of uh value tment man and anything else we do and if it's not a billion- dollar opportunity we don't want to drive after it because we want to conquer big mountains in this life then Regulators are real and if if you are lucky enough sarcastically spoken that you're so big that The Regulators show up and said you should not be getting married to them that makes you too big that's actually a good problem to have it means you're big and big enough that you're on radar for the federal government now they may squel your deal but it also points out what your real Market size and power is and I've always said more market share is good just keep going till the feds call up and say you have to stop just do it legally and they won't and there won't be any problems with the feds they'll just want you to stop funding funding can do more than Provide Capital and that's just what I was talking about with figma and the private placement maybe for some of their employees to get some off the table set the size and perception of a market leader the value of figma is $20 billion according to last financing round and Adobe that's a pretty big validation of Y size then private placements let let employees take a little off the table but not too much don't let them go by the the house by the beach and kind of retire early especially if they're great people say hey stay at the party here get your little off the table take care of student loans you do some things you want for your family and put some in the bank a little more Comfort a little bit more liquidity but let's stay here with us leave some chips on the table and let's go and that is the lesson for you and me kind of wrapped up there for whatever you're doing the story of figma I love it I think it's a great story great software man wouldn't be Man Without figma now I'm going to pick up my Vault I hope that unlocked your brain alure unlocks mine and I'm going to run back to studio and wrap up all right I hope you enjoyed that case study I just love doing case studies as you know I say that all the time but it's so true I love teaching and I love finding lessons in somebody else's mistakes and successes to apply to my companies and share them for your companies you know me I like to say it whether you're running a t-shirt company in Berlin or a technology company in the United States you can learn from other people great artist copy phenomen exceptional OTS steel there's some phrase that goes like that if you like that case study please check out these a little bit more information if you enjoyed what we're doing on figma and until next time I'm Tom ellworth the bisoc and I hope I left you better than I found you

Channel: Biz Doc Podcast

Views: 5,488

Keywords: BizDoc, Business Insider, Valuetainment, PatrickBetDavid, Tom Ellsworth, Business News, Politics, Entrepreneurs, Entrepreneurship, Dave Ramsey, PBDPodcast, Interest rates, recession, economy, american news, figma, adobe, acquisition, design, ux, ux design, fed, merger, venture capital, tech business news

Id: _HX-nb7S6aE

Length: 20min 19sec (1219 seconds)

Published: Tue Jan 02 2024