Figma Inc.’s 250% surge in its debut session is the kind of coming-out party every startup dreams of when it goes public.
The finely choreographed process for the $1.2 billion IPO, culminating in a fully diluted valuation of more than $65 billion, also puts rivals on notice that Figma’s ambitions are expanding.
The design and collaboration software company led by Dylan Field, who started the firm in 2012 with a friend from Brown University, soared above the $20 billion mark it would have fetched had a sale to Adobe Inc. not been scrapped in 2023.
Shares of the San Francisco-based firm closed at $115.50 each on Thursday in New York, more than tripling the IPO price of $33 apiece. The trading gives Figma the largest first-day pop in at least three decades for a US-traded company raising more than $1 billion, data compiled by Bloomberg show. It also makes Field one of the world’s richest people.
Adobe’s planned acquisition of Figma, which at the time would have been the biggest-ever takeover of a private software company, was panned by the Photoshop maker’s shareholders, who sent its stock down nearly 17% the day the deal was announced. Today that deal looks like a bargain.
Accounting for employee stock options and restricted stock units, including RSUs for Field, the company’s fully diluted value is more than triple what Adobe had agreed to pay in cash and stock. Figma may never again be so cheap, and as it battles with Adobe and Australian startup Canva Inc. to dominate the use of artificial intelligence in creative tools, the company’s soaring shares may open the door to some dealmaking of its own.
Investor Enthusiasm
Investors have handsomely rewarded Figma for its rapid growth, and the IPO’s bankers made sure their enthusiasm wouldn’t go unnoticed.
Figma launched its listing on July 21 with its eye on a fully diluted valuation of as much as roughly $16 billion, well below the figure in the Adobe deal. That target was still positioned as a victory, coming after a tender offer last year valuing the design-focused company at $12.5 billion.
Still, few market-watchers thought Field and his bankers from Morgan Stanley, Goldman Sachs Group Inc., Allen & Co. and JPMorgan Chase & Co. would stop there. The marketed range was raised on Monday to $30 to $32 a share from $25 to $28.
The shares offered in Figma’s IPO were ultimately more than 40 times oversubscribed, with more than half of the orders receiving no stock, Bloomberg News reported.
The pacing almost perfectly mirrored Circle Internet Group Inc.’s debut in June, which similarly laddered its price and share count increases ahead of its 168% first-day pop.
A key question for Figma’s long-term success is whether it can become a tool used by office workers beyond designers. The company’s suite of tools is seeing strong adoption by software developers, product managers, and marketers, said Andrew Reed, a partner at Sequoia Capital and a member of Figma’s board.
Sequoia, one of the most storied Silicon Valley venture firms, first invested in Figma in 2019. Around that time, companies were beginning to adopt Figma’s product en masse, Reed said.
Like many software firms, Figma charges clients based on the number of users and the kind of seat those users have. It added Dev Mode to the platform in 2023 to enable closer collaboration with developers, and has more recently incorporated AI technology into many of its own tools. This year it introduced Figma Make, an AI-based product that lets the user turn prompts into functional prototypes.
The use of AI-focused software creation apps that are potential competitors to Figma, such as Lovable and Bolt, has rapidly increased this year. Weaving AI features into Figma’s products is a top priority, Field said in an interview. “We have so much room to explore how we can make great AI products and experiences.”
What Bloomberg Intelligence Says
Figma’s financial metrics stand above most large-cap software companies, with growth north of 40%, a net-dollar retention rate of over 130% and high pricing power given the lack of a credible rival.
– Anurag Rana and Andrew Girard, technology analysts
Going public allows Figma to have a big brand moment which centers the importance of design, Field said. “This is a time where we can create tremendous value for our community, our customers, and I think the public market is the right place to do it.”
AI isn’t the only fashionable technology Figma is embracing. The company’s board approved a $55 million investment in a Bitcoin ETF run by Bitwise Inc. last year, and signed off in May on a $30 million investment in the cryptocurrency, its IPO filings show. The company bought 30 million of Circle’s stablecoin USDC, valued at $1 each, and plans to reinvest the holdings into Bitcoin directly.
Figma has also authorized the issuance of blockchain stock that could lead to selling blockchain-based tokens as a form of its shares, though it currently doesn’t have specific plans to do so, according to the filings.
Acquisition Currency
Figma’s bulldozing IPO campaign has produced a well-capitalized company whose stock can be currency in acquisitions — one of the potential uses detailed in Figma’s IPO filings — and whose growing footprint in creative work could make it a fierce rival to the company that once tried to absorb it.
The company mentioned just two acquisitions in its filings, the largest of which is a $35.5 million deal for Payload, an open source headless content management system. Field likely has bigger deals on his mind, based on the founder letter included in the IPO filing.
In an interview with Bloomberg TV, Field reiterated the pledge he made in the IPO filing’s founder letter that the company would pursue M&A at scale.
“There’s so much out there which can be applicable to the company when you think of the breadth of product design and development,” he said. “It has to be an amazing team, an amazing asset, and has to be something where we think the team is culturally consistent.”
After its acquisition plans were thwarted, Adobe discontinued XD, its most direct Figma rival. Like many software companies, Adobe’s current focus is adding AI features to its flagship creative products like Photoshop.
Australia-based Canva’s AI features are intended to speed the design process. In April, the company introduced a conversation-based AI tool, which responds to voice and text prompts to edit photos, generate slide decks and re-size designs.
The soaring share price also puts into play the performance-based awards Field has, including a 10-year “moon-shot” compensation package awarded just last month that begins to vest once the 60-day average stock price exceeds $60. The highest hurdle requires shares to top $130.
Field’s stake is worth $6.1 billion. He will continue to control the company with 74.1% of the voting power after the IPO through his holdings of Class B shares that have 15 votes each, the filings show.
The company sold 12.47 million shares in the IPO, which priced Tuesday, while investors including Index Ventures, Greylock Partners and Kleiner Perkins sold 24.46 million shares. The shares were marketed for $30 to $32 per share, after the company increased the range earlier in the week.
The company’s stock trades on the New York Stock Exchange under the symbol FIG.
