As we speak, Adobe introduced its intention to amass Figma for $20b, valuing the enterprise at 50x present ARR, the very best a number of paid for any software program firm of scale. Congratulations to crew Figma on constructing their spectacular enterprise.
Doesn’t this acquisition reset the market worth regardless of this 12 months’s 70% correction?
After the correction earlier this 12 months, public valuation multiples had reset to these of 2017. That 12 months, Cisco acquired AppDynamics for 17x trailing income. If we assume an organization acknowledges about 2/3 of its ARR as income, then I estimate the Adobe/Figma deal at roughly 75x trailing income.
That’s not a bear market a number of. Doubly true when the median public firm as we speak is buying and selling at 6.3x.
Not too lengthy earlier than the general public market correction, high-growth startups routinely commanded 100x ARR multiples. If an acquirer is prepared to pay 50x, shouldn’t a VC be prepared to purchase shares at 100x at a a lot earlier stage? Doesn’t this acquisition reset the market worth regardless of this 12 months’s 70% correction?
The reply is probably going not. Whereas Adobe’s acquisition might set a high-water mark, it’s a single transaction. The atmosphere hasn’t modified a lot.
Earlier than this announcement, US venture-backed software program M&A was monitoring to its worst 12 months since 2017, at about $7b, down from $71b final 12 months.
Public firm multiples have floundered round 5-6x on account of macroeconomic uncertainty. This week’s excessive inflation print damped latest public rallies.
When modeling funding instances, VCs typically use a basket of comparables – not a single transaction – to justify costs, even when that single transaction is a firecracker that lights up your entire evening sky.
