🧐 Is Acquisition the Right Way to Kill Competitors? Adobe-Figma Edition
One of the biggest startup deals ever just took place. And here's our analysis on whether or not it makes sense.
The tech world recently witnessed one of its biggest acquisitions.
It is in fact the biggest takeover of a private company.
Adobe has agreed to acquire Figma for $20 billion.
If you're wondering why people on LinkedIn are making such a big deal about this, ReadOn!
🤓 Introduction, Please?
You may or may not have heard of Adobe, but you must have heard of PhotoShop.
It is one of the most well-known photo editing softwares. In fact, it was so popular that at one time, the word Photoshop was used as a synonym for editing.
But Photoshop is super expensive. So much so that it is one of the most pirated softwares out there.
This and the other inefficiencies that came with Photoshop led to the birth of Figma.
Figma’s co-founder, Dylan Field, wanted to make a better version of Photoshop. One that was much easier to use which would work on a web browser and would be connected to the cloud. And above everything else: would provide ease of collaboration to designers.
Basically, Field wanted to simplify things, something that a lot of tech startups these days are working on. You see, in today's world, even people who aren't well-versed with technology have to deal with it every day. This is why solutions like Figma are gaining popularity: they allow everyone to access tech, without much hassle.
For instance, Canva is launching a whole suite of tools that can help you create websites, convert documents into presentations and presentations into videos with ease.
And TikTok is making looking for jobs (yes, you can now upload video resumes on the platform) and searching for restaurants much easier with its interactive and addictive video platform.
In fact, a lot of teens now prefer searching for stuff on TikTok rather than Google Search.
As for Figma, it has gained 4 million users belonging to companies like BMW, Netflix, Airbnb, Zoom, Discord and much more.
In fact, many prefer it over the Adobe designing tool, Adobe XD. Probably because the tool is also much cheaper (there is even a free tier). This possibly scared Adobe.
So, instead of spending its resources on fighting Figma, it decided to use them to acquire it.
But does this acquisition make sense?
📖 What do the Numbers Say?
Adobe has bought Figma at a valuation of $20 billion, which is double the valuation Figma secured last year.
What's more, it is 50 times the projected revenue of Figma.
Worse still, it is more than Adobe's entire revenue for last year.
So, the news caused Adobe's value to plummet by $30 billion, with the company's shares witnessing their worst day since 2010. That's because investors don't think this insane valuation for Figma makes sense.
So, is the acquisition justified? Or could a major company like Adobe have spent this money on improving its products?
🤔 Should Adobe Buy Figma?
For starters, the superiority of Figma has been proven by Microsoft's acceptance of it. Microsoft has had a longstanding relationship with Adobe. Despite this, designers at Microsoft are now choosing a new-age product.
Second, there is no telling if these designers who have now gotten so used to using Figma would shift to Adobe if it did manage to make a new product.
And most importantly, Adobe is taking a lesson from its tech predecessors.
Lots of huge tech companies that seemed undefeatable, lost out because they failed to tackle up-and-coming competitors.
Yahoo had the chance to buy Google for $3 billion and Facebook for $1.1 billion. But it didn't. Simply because it thought the asking price was too much.
Blockbuster didn't buy Netflix for $500 million and now it doesn't even exist. Netflix completely wiped it out.
Meanwhile, look at Google. It bought Android, a relatively small startup back in 2005. But it gave it the tools to compete with Apple and Microsoft, taking Google to the heights it is at right now.
Similarly, buying Figma protects Adobe from becoming irrelevant and also makes both companies stronger, safeguarding them from the competition.
And it gives Figma a massive growth opportunity and access to all of Adobe's resources.
A huge plus is that for the time being, Figma is going to be run independently, so all the designers out there can breathe a sigh of relief.
However, the deal raises an important question. A lot of tech giants are clearly losing market share to up-and-coming startups. And that's the way of life. These giants had also replaced old technologies to become who they are today.
But a lot of them are so huge today that instead of focusing on innovation as the way forward, they can simply afford to buy out a lot of their competitors. This only makes them stronger, while stunting the growth of many new companies.
And if these companies can't acquire their competition, they simply begin to copy them. A classic example: YouTube, Facebook and Instagram. They are all trying to become the new TikTok.
So, will new-age companies ever be able to break the monopoly of tech giants? Or will they simply be acquired by their competition?
🤨 Some Unanswered Questions About the Adobe-Figma Deal
Before you start mourning or celebrating Figma's acquisition, let us tell you that there are a lot of uncertainties surrounding the deal.
Adobe already has a Figma-like tool: Adobe XD. What is going to happen to that? Will it shut down Adobe XD or will Figma be sacrificed?
What's more, will the deal be approved by regulators? An Adobe-Figma combo could be too strong to be allowed to exist and authorities may shut down the acquisition completely.
Do you think the deal should go ahead?
Fun Fact: Figma wanted to provide its services for free but Microsoft didn’t trust a free software startup tool. So, Figma quickly added a subscription model.
Tells us a lot about human psychology. And if you have to pay for Figma, you know whom to blame.
⚡In a line: The tech deal of the year has just gone through and while this may be a win for Adobe, it could be a major loss for designers and design startups everywhere.
💡Quick question: Should tech giants be simply allowed to buy off their competitors?
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Thank you for making this news so simpler :)