As IPOs go quiet again, Figma could represent some hope

Figma made headlines in September 2022 when Adobe came a callin’ with a $20 billion offer they couldn’t refuse. It was a huge amount of money and many suspected that Adobe was simply using its market clout to take a rival off the board. Regulators seemed to agree, and after a year of back and forths, Adobe saw the writing on the wall and walked away from the deal at the end of 2023.

But all was not lost. Figma got a $1 billion kill fee for its trouble, and last week filed confidential paperwork with the SEC, signaling its intention to go public. The confidential part means that it has filed S-1 paperwork, but doesn't have to reveal the contents publicly just yet, and can delay announcing an IPO date indefinitely. When it does reveal the timing, it will also have to disclose the financial data.

The company took a long road to get to this point, but the story goes that the two founders, Dylan Field and Evan Wallace (who has since left the company), came up with a unique idea while students at Brown University in 2012.  The plan was to build a browser-based, collaborative design tool. It was a radical idea at the time when all design software was on the desktop and designers worked in isolation with total control over the process.

A long road

It took a lot of time and patient investors to fulfill that vision because the first version wasn’t released until five years later in 2017. Ironically, designers didn’t even like the collaborative approach at first, but they grew to love it, and by 2021 the company had a $10 billion valuation. 

Last July, the valuation had reportedly grown to $12.5 billion, well below Adobe's generous offer, but still higher than the one in 2021. And by now, we all know that 2021 valuations were often a tad generous. Today, the company has 1600 employees, and CNBC reported it earned $600 million in revenue last year.

It hasn’t been a great time for tech IPOs. Several companies who were rumored to be going public this year including Klarna, Stubhub and Chime have pulled back amidst a turbulent market rocked by uncertainty related to the on-again, off-again tariff news.

Tech IPOs wanted

Alex Wilhelm, my former TechCrunch colleague, now the editor of the Cautious Optimism newsletter, says the Figma filing could be good news for a market longing for tech IPOs to get going again. “The Figma IPO filing could not come at a more welcome time. As other tech companies pull back on their IPO plans, the market needs a well-known champion with rock-solid economics to list, and list well, if we want to break the current liquidity drought,” Wilhelm told FastForward.

As he pointed out, while there was some big M&A activity including the $32 billion Google Cloud-Wiz deal in the first quarter and a handful of IPOs like CoreWeave, he says that we could definitely use some more action. “There are still four-figures worth of unicorns that need to find an exit. Given trade tensions, a sour stock market, and business confusion, any and all help for private-market companies to reach an exit is a win for venture capital and founders alike,” he said.

While Figma gives a market hungry for some tech IPO action a reason for hope, they are under no obligation to go public until they are good and ready. Their investors waited five years for a product. They can probably wait a while longer for the exit.

Note: This is an expanded version of a story that originally appeared in last week’s newsletter.

Featured image by Chenyu Guan on Unsplash