Design Startup Figma’s CEO Is Now A Billionaire

Key Concepts

• Figma: A San Francisco-based design startup aiming to be the "Google Docs for design."
• Adobe Acquisition: A proposed $20 billion takeover of Figma by Adobe that was ultimately called off due to regulatory concerns.
• Internal Valuation: Figma slashed its internal valuation to $10 billion after the Adobe deal fell through.
• Voluntary Exit Package: Figma offered employees a voluntary exit package of 3 months severance.
• IPO: Initial Public Offering; Figma raised $1.2 billion by selling shares to the public.
• Fully Diluted Basis: Valuation including options and other equity awards outstanding.
• Class A & B Shares: Different classes of shares with varying voting rights. Class B shares have more voting power.
• Voting Rights: The power to influence company decisions through voting on shareholder matters.
• Antitrust Concerns: Concerns that the Adobe acquisition would reduce competition in the design software market.
• Retention Package: Incentives offered to key employees to remain with the company.

Figma's Post-Acquisition Reset

After the collapse of the $20 billion Adobe acquisition in January 2024 due to antitrust concerns, Figma's CEO Dylan Field initiated a company reset. This involved:

• Internal Valuation Cut: Figma slashed its internal valuation to $10 billion.
• Voluntary Exit Package: A voluntary exit package of 3 months severance was offered to employees, with only about 4% (around 52 employees out of 1300) taking the buyout.
• Motivation: According to Figma investor Mammoon Hamid from Kleiner Perkins, the reset aimed to "anchor the company and prepare it for the long-term future as an independent startup," resulting in "a lot of extremely motivated folks who have been working relentlessly to deliver new products."

Figma's IPO and Valuation

Nearly 18 months after the reset, Figma successfully raised $1.2 billion through an IPO.

• Valuation: The IPO valued Figma at over $19 billion on a fully diluted basis.
• Significance: This IPO is among the five biggest in its sector this year.

Dylan Field's Billionaire Status and Control

The IPO has made Figma's co-founder and CEO, Dylan Field, a billionaire.

• Net Worth: At the IPO price, Field is estimated to be worth $1.8 billion.
• Future Compensation: Over the next 10 years, Field could unlock additional stock currently worth $1.3 billion at the IPO price before taxes, based on compensation plans awarded in 2021 and 2025, contingent on him remaining with Figma and the company's stock price quadrupling to $130 per share.
• Voting Control: The IPO terms grant Field significant control over Figma. He has the right to vote his co-founder Evan Wallace's shares, worth nearly $900 million at the IPO price.
• Share Structure: Field and Wallace own 99% of Figma's class B shares, which carry 15 times as many votes as the class A shares held by other investors.
• Overall Control: This gives Field control of around 74% of the company's voting rights, including nearly 26% tied to Wallace's shares.

Evan Wallace's Contribution and Philanthropy

Evan Wallace, Figma's co-founder and former CTO, also benefited from the IPO.

• Estimated Worth: Wallace would be worth an estimated $1.3 billion based on the IPO price.
• Philanthropic Donation: In June, Wallace donated a third of his shares to the nonprofit Marin Community Foundation, which works to fight homelessness.
• Departure: Wallace left Figma in 2021, according to Axios.

Adobe's Perspective and Regulatory Scrutiny

The failed Adobe acquisition faced opposition from various stakeholders.

• Adobe's Rationale: Adobe CEO Shantanu Narayan considered the deal "transformational" for Adobe's suite of products like Photoshop, Premiere Pro, and InDesign.
• Investor Concerns: Adobe investors balked at the high price, which valued Figma at twice its last valuation and around 50 times the startup's $400 million revenue.
• Regulatory Concerns: Antitrust regulators in the United States, the United Kingdom, and Europe raised concerns about reduced competition.
• User Concerns: Figma users, many of whom had switched from Adobe's tools, also opposed the acquisition.
• British Antitrust Watchdog: The deal was ultimately called off in late December 2023 after the British antitrust watchdog warned that it could reduce competition for design software.

Comparison to Elon Musk's Tesla Compensation Plan

The structure of Field's long-term incentive plan is compared to Elon Musk's $56 billion Tesla moonshot grant.

• Aggressive Incentive Plans: Both reflect a trend of aggressive long-term incentive plans.
• Legal Scrutiny: Musk's grant was voided by a Delaware court in January 2024, which ruled that the process underlying the award was not fair due to Musk's control over the board. Musk has appealed the ruling.

Conclusion

Figma's successful IPO marks a significant comeback after the failed Adobe acquisition. Dylan Field's leadership, the company's reset strategy, and the strong motivation of its employees have contributed to this success. The IPO has not only made Field a billionaire but also solidified his control over the company, while also highlighting the increasing scrutiny of large tech acquisitions by regulatory bodies.