IPO Analysis Time
I’ve been tracking public offerings lately and want to share my research on Figma’s upcoming debut. They’re going public on January 31st with what looks like a major offering.
What Does Figma Actually Do?
Figma operates as a web-based design collaboration tool. Think of it like Google Docs but for designers and developers. They help teams go from initial concepts to finished products. For design professionals, this platform is as essential as Excel is for finance workers.
The company started with their main design tool for interface creators, added FigJam for brainstorming sessions, and now includes Dev Mode for programmers. They use a freemium business model where basic features are free but teams pay for advanced functionality.
Financial Performance Overview:
| Year | Revenue | Growth Rate | Gross Margin |
|---|---|---|---|
| 2022 | $324M | - | 87.8% |
| 2023 | $505M | +56% | 90.4% |
| 2024 | $749M | +48% | 88.9% |
| Q1 2025 | $228M | +46% YoY | 87.7% |
The company is pricing shares at $25-28 each with a $15 billion valuation. They’re releasing 37 million shares to raise about $1.1 billion, trading under ticker $FIG on NYSE.
Key metrics show consistent 50% annual revenue growth with gross margins around 90%. They maintain $1.5 billion in cash with zero debt. Interestingly, they hold $100 million in Bitcoin ETFs.
Their customer base includes 95% of Fortune 500 companies with 13 million monthly active users. About 70% of revenue comes from enterprise customers, and they have over 10,000 community-built plugins.
Investment Perspective:
The bull case centers on market dominance potential. Figma already controls 80% of the designer market and shows incredible user retention. New customers often discover them organically rather than through expensive sales processes. With current profitability and substantial cash reserves, they can invest heavily in research without dilution concerns.
The bear case involves valuation concerns at 15-20x forward sales. Any growth slowdown could trigger significant selloffs. Competition from Adobe, Canva (valued at $26B privately), and AI tools poses ongoing challenges. AI particularly threatens their model by potentially reducing the number of paid seats needed per project.
Trading Strategy:
Figma uses an auction-style allocation system where institutions bid on both price and quantity. This reduces the typical IPO opening pop but should create more efficient pricing.
Given Adobe’s previous $20 billion offer in 2022, current pricing seems reasonable. However, about 24 million of the 37 million shares come from existing shareholders cashing out, which raises some concerns about insider confidence.
I’m pursuing allocated shares and will consider additional purchases at market open depending on initial allocation and opening price action.