Figma’s IPO: A SaaS Titan Emerges—or a Bubble in Disguise?

Figma’s upcoming IPO, led by Morgan Stanley, has sparked heated debate in the tech investing community. Is this a landmark moment for a SaaS disruptor solidifying its dominance over Adobe, or a cautionary tale of overvaluation in a cooling market? Let’s dissect Figma’s moat, valuation, and the institutional signals driving this deal—and decide whether it’s a buy or a risk.

Figma’s Moat: Ripping Up Adobe’s Playbook

Figma’s cloud-native, collaborative design platform has become the “source of truth” for modern teams, displacing legacy tools like Adobe XD and Sketch. Unlike Adobe’s siloed creative apps (Photoshop, Illustrator), Figma’s real-time collaboration and integration with engineering workflows (via Dev Mode) have made it indispensable for product teams.

• Market Share: Figma now commands 80–90% of the UI/UX design market, with 90% of designers preferring it over Adobe tools.
• Enterprise Traction: Major firms like Microsoft, Airbnb, and Uber rely on Figma’s enterprise plans, which include features like SSO and bulk pricing for teams exceeding 500 users.
• Retention Goldmine: Figma’s 150% net dollar retention rate (vs. Adobe’s Creative Cloud at ~110%) shows customers aren’t just staying—they’re spending more as they expand usage into product management, writing, and engineering.

This shift has eroded Adobe’s dominance in the $16.5B design TAM, forcing Adobe to pivot to AI and localization to compete. Figma’s moat? It’s sticky, cross-functional, and built for the cloud-first era.

Valuation: Is Figma Overpriced, or a Growth Darling?

Let’s crunch the numbers. Figma’s $12.5 billion pre-IPO valuation (post-May 2024 funding) is based on $700M ARR in 2024, growing at 35% YoY. Compare this to Adobe’s $80 billion market cap (as of 2023) and its 15–17% revenue growth—slower than Figma’s hyper-growth.

• Revenue Multiple: Figma’s valuation implies a 17.9x ARR multiple (vs. Adobe’s ~7.5x revenue multiple in 2024).
• Public SaaS Benchmarks: The median SaaS valuation multiple has fallen to 6.8x ARR due to post-2021 market corrections. Figma’s premium reflects its moat and growth, but is it justified?

Why Morgan Stanley’s Role Matters

Morgan Stanley’s underwriting signals institutional confidence. The firm’s involvement often correlates with IPOs that outperform post-listing, as seen in Snowflake and DoorDash. Here’s why this matters:
1. Validation of Figma’s Model: Morgan Stanley’s expertise in tech IPOs suggests Figma’s unit economics (90% gross margins) and scalability are sound.
2. Market Liquidity: The underwriter’s clout can attract institutional buyers, stabilizing the IPO in a volatile market.

The Case for Buying: Figma as a SaaS “Buy-and-Hold”

• Moat + Growth = Defensibility: Figma’s enterprise adoption and cross-functional use cases (FigJam, Figma Slides) are expanding its TAM beyond design.
• AI-Driven Upside: New enterprise AI tools could boost retention and pricing power, countering threats from open-source rivals like Penpot.
• IPO Pricing Sweet Spot: At 17.9x ARR, Figma’s valuation is below its 2022 high of 50x ARR and reasonable given its 35% growth rate.

The Case for Caution: Frothy Multiples and Market Risks

• Overvaluation vs. Peers: Canva, its closest competitor, trades at ~5x ARR despite similar usage rates. Figma’s premium hinges on its enterprise edge—will it materialize?
• IPO Market Headwinds: 2025’s IPO climate is shaky (see Klarna’s delayed listing). Investors may demand lower multiples for SaaS firms.
• Pricing Pushback: Recent price hikes have sparked debates about value-for-money. If customers balk, retention could slip.

Final Verdict: A Strategic Buy for SaaS Exposure

Figma’s IPO isn’t a bubble—it’s a rational bet on a category leader with a moat few can replicate. While risks exist, its 35% growth, enterprise traction, and Morgan Stanley’s imprimatur make it a long-term winner.

Investment Thesis:
- Buy if: You believe SaaS’s “Rule of 40” (growth + profitability) will rebound. Figma’s 90% margins and 35% growth already hit this metric.
- Avoid if: You see a recession killing enterprise SaaS budgets—or if you think AI-driven rivals will erode Figma’s edge.

The verdict? Figma is the SaaS disruptor to own for the next decade—provided you can stomach short-term volatility.

Stay hungry, stay analytical.