Thoughts on Figma's Public Offering Plans and Stock Price Valuation?

Other Questions Figma
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Figma Going Public - What’s Your Take on the Numbers?

I’ve been following Figma’s plans for their IPO and I’m curious to know what everyone thinks about its potential.

They are looking to offer around 37 million shares at a price between $25 and $28 per share, which puts their total valuation at about $14.6 to $16.4 billion. It’s interesting to note that Adobe previously wanted to buy Figma for $20 billion in 2022, but that deal didn’t go through due to regulatory issues.

Business Model Overview

Figma is a software company that specializes in design tools for collaborative work, similar to Google Docs but tailored for designers. Their main competitors include Adobe XD and other traditional design platforms.

Key points to consider:

  • High profit margins nearing 85%
  • Subscription revenue model ensuring consistent income
  • Natural user-led team adoption
  • Value increases with more team members using the product

Competitive Advantages

Figma has established a strong competitive edge: switching to another platform can be challenging for teams since their workflows are deeply integrated with Figma. Moreover, it has built a loyal user base among designers.

Financial Overview (Estimates for FY2023)

According to my findings:

  • Estimated yearly revenue of around $600 million
  • Projected year-over-year growth between 40-45%
  • Consistently high profit margins, though with notable R&D expenses
  • Free cash flow seems to be close to breakeven

Valuation Analysis

I ran some quick calculations for Figma’s potential value:

  • Owner earnings estimated at $60 million
  • Anticipated growth of 25% for the first five years, tapering afterwards
  • Used a discount rate of 10%
  • Estimated intrinsic value around $3.3 to $3.5 billion

This suggests a fair value of about $18.50 per share, if my calculations are accurate.

Final Thoughts

Figma appears to be a solid company with a desirable product. However, the IPO price of $25 to $28 per share seems a bit steep compared to what I believe it’s really worth.

What does everyone else think? Have I overlooked anything significant? I’d really appreciate your insights on this topic.

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You’re right about the valuation gap - it’s pretty stark. But I think there’s more to the story here. I’ve been following SaaS IPOs for a while, and companies like Figma get crazy valuations because of network effects and market position, not just the numbers on paper. Figma nailed the timing with remote work. They grabbed massive market share right when distributed teams desperately needed collaborative design tools. That created huge switching costs - it’s not just workflow integration, it’s entire design systems and company processes built around their platform. The failed Adobe acquisition actually helped them. They kept their independence while proving they’re valuable enough for tech giants to want. Plus the regulatory pushback basically confirmed they dominate the market. Your intrinsic value calc looks conservative to me. International expansion and enterprise upselling could be huge. Most design teams start with basic plans and upgrade as they grow. Revenue per user could easily beat your 25% growth estimate in the first few years. The IPO pricing definitely has that typical tech premium baked in. Whether it’s worth it comes down to execution - can they deliver on their roadmap and fight off Microsoft and other enterprise players trying to muscle in?

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Honestly, figma’s IPO timing seems terrible. tech stocks are getting hammered and investors aren’t buying growth stories anymore - they want actual profits. even with solid fundamentals, that $25-28 range is gonna be tough to sell in this market.