In recent news, Adobe’s planned acquisition of Figma, a design collaboration platform, has been called off due to regulatory concerns in the EU and the United Kingdom. This development has raised worries about the impact of stricter competition rules on startup exits. However, it’s important to put this event into perspective and understand its implications for the broader startup market.
While the cancellation of high-profile deals like Figma and Plaid (which faced regulatory challenges during Visa’s acquisition attempt) sparks concerns about startup liquidity, it’s crucial to recognize that these cases are outliers. The majority of startup deals differ significantly in terms of size, market share, and influence.
Data from PitchBook reveals that the median exit value for U.S.-based startups in 2023 was $64.5 million, which is less than 1% of the $20 billion Adobe was prepared to pay for Figma. Looking back, the median acquisition value for startups in the hype-filled years of 2021 and 2020 was $65 million and $61.1 million, respectively. These figures indicate that the landscape for startup M&A hasn’t experienced significant changes.
It’s worth noting that mergers and acquisitions have consistently been the preferred exit strategy for startups over the past decade, even during the IPO frenzy of 2021. In fact, there were more than four times as many acquisitions as there were public listings that year.
While the Figma deal’s cancellation may have a negative impact on investors and startups seeking monumental exits, it’s vital to recognize that such situations are rare and typically involve highly valued startups. Most startups, especially those with inflated valuations, will likely sell for significantly less than their perceived worth. Moreover, the failed acquisition of Plaid by Visa did not deter the latter from engaging in other startup acquisitions.
Customer satisfaction is another important factor to consider. In the case of Figma, although the deal’s collapse disappointed investors, the fact that customers expressed happiness about the decision is noteworthy. Unhappy customers can pose significant challenges for a company’s future, potentially creating opportunities for rival startups to lure them away.
It’s worth highlighting that despite regulatory scrutiny, notable startup transactions, such as Databricks’ acquisition of MosiacML and Visa’s acquisition of fintech Pismo, have successfully taken place this year. These examples demonstrate that substantial acquisitions are still happening despite the occasional failure of high-profile deals.
In conclusion, while the Adobe-Figma breakup has raised concerns about the future of startup M&A, it’s important to understand that such cases are exceptional and not indicative of the broader market. Startups should focus on industry medians and averages rather than isolated records. By doing so, they can navigate the startup exit landscape more realistically and mitigate concerns arising from the fallout of blocked deals.