Dylan Field, co-founder and chief executive officer of Figma Inc., in San Francisco in 2021
Photo: David Paul Morris/Bloomberg via Getty Images

The Adobe-Figma deal is historic for tech startups — if it goes through

Protocol Pipeline

Hello, and welcome to Pipeline. I’m Biz Carson, and I’m devastated after I lost my 149-day Wordle streak to “parer” yesterday. At least I wasn’t alone.

This week in the startup world: Adobe and Figma’s historic acquisition, the silence around Launch House and founders’ favorite VC firms.

Adobe’s $20 billion acquisition of Figma is historic — if it happens

Adobe’s acquisition of Figma is one for the record books. It’s the largest acquisition of a private tech startup at the time it was announced (Facebook’s WhatsApp acquisition went from $19 billion to $21.8 billion by closing, if you want an asterisk). Its 50x ARR multiple is another record in recent history for a startup at scale. For the investors, some of its earliest backers might be returning anywhere from 30x to 90x, per The Information’s calculations. Figma’s co-founders, Dylan Field and Evan Wallace, will both be billionaires based on the size of their stakes.

That’s all incredible — if the deal actually goes through.

A deal of this size is almost certain to come under regulatory scrutiny. Admittedly, my first reaction when I saw the coupling was not sticker shock but “Wait, can they even do that?”

  • Antitrust regulators are certainly zoomed in on Big Tech right now and are closely scrutinizing transactions. Hindsight is 20/20, but a lot of regulators now regret letting the Facebook-WhatsApp deal happen, said Henry Su, a partner at the Bradley law firm who has worked in Silicon Valley and at the FTC. “People will be trying not to make the same mistake,” he told me.
  • Take the FTC’s recent lawsuit against Meta for its acquisition of VR fitness app Within. Meta and Within aren’t seen as obvious rivals given that Meta’s core Facebook business is all about ads, not VR fitness, yet the government still sued to block the deal in July, saying it was choosing to buy market position to make itself dominant in VR. “The distance between Within and Meta is further. There’s a lot more predictions you have to do,” Su said. “Here, there’s no question that Figma is competing with Adobe.”
  • The fact that they are direct competitors is going to worry regulators that this is a “killer acquisition” where the acquisition is intended to snuff out the competition — even if it is pledging to keep Figma alive as its own autonomous product. “It’s not simply, ‘Is there going to be a Figma after this?’” Su said. “It’s the killing of the competitive threat that Figma poses to Adobe.”
  • The other worry is whether this could ultimately harm consumers by taking away choices. Figma’s own webpage directly comparing the two is a piece of evidence the government could use to show that the deal is taking away consumer choice when both are owned by the same company, Su said. There are other alternatives, like Sketch, but it’s much more limited in its use cases (for example, Sketch is Mac-only). If the deal hadn’t crossed regulators’ radar by now, the hordes of upset Figma users that are tagging the FTC and DOJ directly on Twitter to ask for an investigation will assuredly raise a red flag about how consumers feel about the deal and if the government feels it needs to step in to protect them.

Figma is well aware of the risk of antitrust scrutiny, but it believes the deal will be better for consumers in the long run. “We wouldn't have gone through this if we didn't think it was better for the customer,” Figma’s CEO Field told my co-worker Lizzy Lawrence.

  • “We certainly believe it’s going to happen,” Kleiner Perkins partner and Figma board member Mamoon Hamid told me when I asked about antitrust scrutiny. “We expect that process to happen and at the end of it to get approval for it.”
  • The argument for combining is that Figma will be able to more directly incorporate Adobe’s capabilities and potentially address new customer segments that it hadn’t targeted before. And certainly at $20 billion, Adobe is paying full price. “There was one company that accelerated our aspirations and ambitions, and that’s Adobe,” Hamid said. “It was the one thing that really made sense.” Field confirmed that Adobe’s was the only acquisition offer Figma had ever explored.
  • Adobe said in a statement to Protocol that the combination will “greatly benefit consumers” and that it expects the transaction to close in 2023 subject to approvals.
  • There’s protection as well: If Adobe and Figma are blocked legally from doing the deal over antitrust concerns, the merger agreement shows that Adobe will have to pay Figma a $1 billion breakup fee in cash.

Antitrust Debbie Downers aside, it’s a huge win for many in the startup community, and the LPs that stand to benefit from it. VCs are already hearing from endowments about the scholarships they’re going to be able to fund.

  • Index Ventures is Figma’s largest outside shareholder and did its seed round in 2013. Sequoia and Andreessen Horowitz will also benefit. Greylock is another big winner: It was an investor in Figma, and its former venture partner, David Wadhwani, will be Field’s new boss at Adobe.
  • For Kleiner Perkins’ Hamid, who has been overseeing the generational transition at the firm, it’s a big win and validation five years in. “It’s a top five for Kleiner Perkins in our history, and we’re celebrating 50 years,” Hamid said. Field has his own ties to the firm: He was a much-fought-over KP fellow (and a Thiel Fellow) before he started Figma.
The acquisition could also open up an appetite for more deals, whether it’s Big Tech companies looking to bolster their businesses or startup founders now willing to partner instead of going it alone. “The big companies all have their wishlist of really exciting companies that are out there that are high-quality businesses in the private market,” Hamid said. “My sense is that it’s going to be a bit more of an active M&A season.” It’s also going to mean a lot of billable hours for every antitrust lawyer from Palo Alto to Washington.


The VCs that founders like the most (spoiler: It’s not a16z or Sequoia). This week, Founder’s Choice released its new ranking of which venture firm founders say they prefer to work with. Union Square Ventures topped the list and other firms like Y Combinator, Sequoia, Founders Fund and Khosla were all in the top 20. The most shocking result was a16z’s founder approval, which put it in 339th, near the bottom of the list.

“It’s three years of FOMO packed into three months.” This fall’s busy conference season feels like a lot to everyone right now. In NYC, there were dueling fintech events with the Finovate conference attracting formal fintech men in suits and SALT bringing in the eclectically dressed crypto crowd.

What I didn’t hear: much accountability or apologies from VCs on Launch House. Several women told Vox horrific stories about their time at the startup incubator, which is backed by a16z. Now other VCs are pressuring the firm and its partner on the deal, Andrew Chen, to publicly address the accusations of misconduct and cover-up. “I said it once and I'll say it again,” tweeted MicroAcquire’s CEO Andrew Gazdecki. “Really impressed at @a16z's masterclass on how to tarnish a venture capital firm's brand, lots of founders once really admired this firm and now they're just an example of a toxic culture to the startup community.”

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Inside track

Right now venture firms have two choices, says Upfront’s Mark Suster: supersize or superfocus. Valuations won’t blip back in a V-shaped recovery, but will instead settle into a new normal, and VCs will have to react accordingly, he argues in a post on what the post-crash VC market looks like.

A new kind of startup post-mortem: VCs talking directly with founders in open Q&As about why they passed on a deal. Ethena’s Roxanne Petraeus and Homebrew’s Hunter Walkhad a frank discussion on why Homebrew ended up not leading Ethena’s round — a decision that meant the four checks Walk has since invested still haven’t bought him as much if he’d said yes the first time.

Private startups don’t have the same kind of analysts tracking them that public markets do. Venture firm Contrary is trying to change that by publishing memos on companies like Canva, Lattice, Carta and Loom and doing comparisons like Databricks vs. Snowflake.

Need to know

A16z as your landlord? Apparently the firm’s deal to invest in Adam Neumann’s new company, Flow, also included stakes in apartment buildings that Neumann owns.

Google cut half the projects in its internal R&D group. Google’s internal incubator, Area 120, is going to focus on AI-first projects and is slashing the rest.

Third time's the charm for SoftBank? Masa Son is contemplating setting up a third Vision Fund, according to Bloomberg. This comes only a few weeks after SoftBank reported a $23 billion loss, with Son saying that the firm needed to cut costs across the board.

What a week in Washington. Meta for once didn’t have the worst day on the Hill after TikTok took the brunt of congressional scrutiny over its ties to China. Biden ordered more CFIUS scrutiny on supply chain, AI and biotech deals. The CFPB is also coming after “buy now, pay later” companies. (Things aren’t much friendlier in statehouses: California also sued Amazon over antitrust this week.)

Moves: Ex-Cisco CEO John Chambers is back with a new company, and he’s directly going after his old one with a new networking startup, Nile. Former Disney CEO Bob Igeris joining Joshua Kushner’s Thrive Capital as a venture partner. Shift founder George Arison is Grindr’s new CEO and will help it go public via a SPAC later this year. Patreonlaid off 17% of the company and also faced viral allegations on TikTok that it was hosting child sexual absue material (it’s denied them).

From Protocol: Slack used to be the tool of choice for founders. Now more are saying they’re sick of the work environment it creates, so they’re doing away with it. “We didn’t have Slack, we didn’t have email, when we put a man on the moon,” Teamflow’s Flo Crivello said.

Also from Protocol: Gusto’s been on an M&A spree. Here’s how co-founder Edward Kim decided to start doing deals.

Your weekend reading: It’s Elon Musk vs. Bret Taylor, but most people outside of tech circles have no idea who that is. Taylor, who is co-CEO of Salesforce and chairman of Twitter’s board, now finds himself in the middle of a legal battle with billions of dollars, the fate of a company and his steady-hands reputation all on the line.

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Update: This newsletter has been corrected to reflect that Sketch is Mac-only

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