After the Figma-Adobe deal, which design startups are acquisition targets?


Image Credits: Nigel Sussman (opens in a new window)

News that creative software giant Adobe will buy upstart design software unicorn Figma for $20 billion was the single largest event in startup land this week, a surprise upset over the Ethereum Merge coming to fruition. The transaction was notable not only for its scale — 11-figure deals create their own gravity — but also for the questions it raised.

With Figma heading into Adobe’s arms, we are curious which startups will compete for the indie design crown — and which companies might be circling to snap them up in the near future.

How about that $20B Figma-Adobe deal?

Given the scale of the market for software products today, and the increasingly global venture capital industry, there are multiple upstart competitors in every technology niche. Design is no exception. Indeed, these groupings — what we call “startup clusters” here at TechCrunch — are fascinating examples of aggregated venture sentiment and entrepreneurial activity.

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There are plenty of examples of startup clusters that have seen major-company M&A. The OKR software startup knot, to pick an example, has well-funded companies in it like WorkBoard, Gtmhub and Perdoo. It once included, but Microsoft bought that particular concern. TechCrunch would not be shocked if a rival independent player from the remaining startups in the group also found a new home with a major platform company.

So which Figma competitors are still operating solo, and who might buy them? Let’s take a peek.

A quick deal reminder

The Figma-Adobe transaction is huge and somewhat expensive in financial terms. Adobe spent more than 10% of its pre-deal market cap — more now, given a hit to Adobe’s share price after the transaction was announced — a material sum for any public company, let alone one as large as the San Jose-based Photoshop maker.

Paying some 50x ARR for Figma caused a lot of folks to take note; that’s a revenue multiple we’ve not seen for a minute. Tech valuations have retreated from their 2021 highs, after all. So why did Adobe pay so much for the smaller company?

The consensus — and you are welcome to disagree here; we’re just sharing what passes for conventional wisdom — is that Adobe needs more collaborative products, and there was a chance that Figma could eat into its core revenues over time. So while the Figma-Adobe deal was not cheap when we consider its financial heft, it also may preclude certain strategic risks to the acquirer, meaning that it has another layer of value that is hard to measure with our usual tools.

We share this as context for the type of company that might fit as a Figma-ish startup in the market today, as well as to define the sort of company that might be willing to shell out for their products and customer base in advance of what they might be worth to, say, a venture capitalist looking for their next investment.

Who could be the next Figma?

Let’s start with a disclaimer: We are very much online but don’t spend our days designing stuff, so we mostly know design tools from the outside.

That said, we hear quite a lot from design teams, and one of the main positive comments we heard about Figma is that it excels at enabling intra-team collaboration. “Nothing great is made alone,” its site professes.

Figma, in case you also exist outside the design world, facilitates user interface and user experience design. This is quite broad, but some of its competitors have similarly wide-ranging ambitions.

Design may be the next entrepreneurial gold rush

It’s always interesting to see how companies themselves define their competition. Figma’s website touts its advantages over Sketch, Framer, Windows‘ design capabilities, InVision Studio, Miro and Adobe XD.

While these products do overlap, the organizations behind them are quite diverse. Sketch is based in the Netherlands and raised some $20 million in a Series A round in 2019. Fellow Dutch startup Framer closed a $24 million Series B led by Atomico in 2018. InVision raised a lot more capital to date — $356.2 million — and also made 10 acquisitions.

Like InVision, whiteboard company Miro is a unicorn: The $400 million round it raised earlier this year took its valuation to $17.5 billion. The fact that InVision has a page comparing itself to Miro also confirms that the companies are competing for market share — and InVision’s other “versus” pages give us a sense of possible challengers, from FigJam and Lucidspark to Mural.

Mural’s latest round was a $50 million Series C announced in July 2021. At the time, the visual collaboration company disclosed some interesting data points, such as the fact that it had tripled its annual recurring revenue compared to 2020. While its focus is broader than just design, it makes us wonder what the next step could look like for Mural and its more design-focused peers.

Perhaps the startup with even broader appeal than Figma out there is Canva, which offers design software that is more friendly to non-designers. It has raised north of a half-billion dollars, per Crunchbase data, and was worth some $40 billion at last tip. It would be an even larger swallow for a corporate acquirer than Figma, which is saying something.

Canva moves beyond graphic design to launch a visual worksuite

Summing up, there is a large collection of startups working in the design world that compete with Figma in varying degrees. Where you draw dividing lines between products and their corporate creators we leave up to you, but it’s not a small, homogenous group.

So who might be in the market next?

One way to answer the question of which design startup could be next in the acquisition maw would be to consider a list of Adobe competitors and then work out which might have enough cash, market cap, debt access or all three to make a similarly large purchase. But that would be too small a list.

Instead, we’re thinking more about platform companies. One thing TechCrunch has noticed in recent years is that major tech companies like to compete across, well, nearly every possible space. This is why Microsoft builds hardware, Google is trying to figure out a gaming strategy, Apple is building an ad network, and so forth; if there is a spot of potential revenue to be found, the majors want in. After all, they must keep the growth coming, yeah?

Notable in the mix of major tech companies is a productivity-like element to each of their product fleets. Microsoft has Office, which nests inside of its Microsoft 365 service; Google has Google Workspace; Apple has its own productivity software products; Meta has a collaboration service called Workplace; and Amazon has its own nexus of business software services.

Those five companies all have the funds to buy anything they want and — provided that they can get it past regulators — the willingness to write big checks when the time is right. So, the Big Five of the U.S. tech market are all possible buyers of Figma-ish startups. Which is the best possible fit? Microsoft and Google, frankly, but we can squint and make a transaction work at any of the rest.

There are other names that come to mind. Dropbox and Box have a history of buying smaller startups, and both have worked to extend the software layer they have built atop the storage and content management services they offer to businesses. Even more, they have enterprise customers already on board — so why not buy something to further grow their value proposition?

One group that we don’t see having an active role in any potential design startup acquisitions, at least in the near term, is private equity. Those investors like to buy companies that they can partially disassemble for cash flow, allowing their new assets to be levered and left wounded ahead of a future sale, allowing the PE player in question to get paid twice. However, with Figma setting the potential exit-price bar so high for Figma-like companies, what startup would be willing to accept private equity pricing?

As all major tech platforms have productivity suites of a sort, they are on the potential acquirer roster. Some smaller content-focused tech companies also make the mark, just as some financial buyers perhaps don’t. So long as the IPO window remains closed, these deals will remain the obvious exit point for what is clearly a hot software market replete with active companies.

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