Pixels and Profits

Figma

Figma was founded in 2012 by Dylan Field and Evan Wallace. Figma launched the first fully browser native design platform, enabling real-time collaboration. They have since become a hyper-growth software innovator dominating the cloud-based design and collaboration space. Figma has scaled its user base to over 4 million users globally, with high-value enterprise accounts with companies across the Fortune 500. Previously, Adobe tried to acquire Figma for $20 billion, but Lina Kahn and her EU countercucks blocked the deal. Figma has successfully established themselves as the default operating system for product teams, creating significant switching costs and embedding its workflows feep into customers day to day operations. 

Figma’s mission is to “make design accessible to everyone,” and lower the bar to creativity and collaboration in a segment that has traditionally been reserved for expensive desktop software and siloed teams. By reducing the barriers to creating high-quality designs, Figma empowers users and organizations of all sizes to build better products faster. Figma has positioned itself as an end-to-end collaboration hub for product development. With Figma’s rapid execution, they are well-positioned to capture a large share of the ever-growing design and collaboration software market. 

The bad boys over at Azar Capital Group are fans of Figma and are frequent users of Figma. Figma’s strong freemium model has yielded explosive ARR growth and gnarly margins exceeding 80%. As enterprises increasingly adopt Figma for design and product development, the company’s revenue is expected to grow by 30% or more annually. The combo meal of strong network effects, switching costs, and an ever-growing ecosystem of third-party plugins creates a strong moat that makes it difficult for competitors to copy. The lads are giving Figma a ‘BUY’ rating, in our view, over the next three to five years, has the potential to become the default infrastructure layer for digital product teams, capturing both seat-based subscription revenue. This combo of scale, retention, and strategic optionality makes Figma a very compelling growth company in the software sector. 

The future for Figma is bright; key catalysts include accelerated enterprise adoption, higher seat counts, and per-user pricing, as well as ramping up the monetization of FigJam. Figma is also targeting underpenetrated markets in EMEA and APAC. Finally, the company's product innovation from AI-powered design assistants and developer handoffs could further differentiate the platform and strengthen the user ecosystem. However, risks remain with strong competitive pressure from Adobe, which could spark price wars or aggressive bundling strategies. Also, macro uncertainty and enterprise budget scrutiny (use Ramp, save time and money) may slow deal cycles and lengthen sales pipelines. As per usual, Figma could face operational missteps, which could impact customer satisfaction and slow adoption. 

Figma’s core product is its design platform, which is a browser-based interface design and prototyping tool that enables real-time collaboration. Figma allows designers, developers, and product managers to create, comment, and iterate seamlessly. Their goal is to replace legacy file-based workflows like Adobe Creative Cloud and Sketch.  Figma also includes sophisticated design system management, version control, and developer capabilities that integrate into enterprise toolchains like Jira, GitHub, and Slack. Figjam is a collaborative whiteboard and brainstorming tool. Figma introduced to capture ideation workflows, positioning them as an end-to-end solution that spans ideation, design, and development. Figma’s revenue is primarily subscription-based based with strong monetization coming from enterprise contracts that can range into the seven-figure territory. 

Figma has a global footprint, but has primarily focused on the United States. Figma has expanded into the EMEA and APAC regions, which reflects the rising demand for modern design collaboration tools. Figma has also targeted educational institutions and startups globally through its freemium distribution and community evangelism, and has created long-term customer pipelines that could mature into enterprise contracts. International expansion remains a core pillar of Figma’s growth strategy, with localized marketing, partnerships, and compliance investments to capture underpenetrated markets. The opportunity to penetrate the European and Asian markets is huge as enterprises in these regions are accelerating their digital footprint and have begun adopting cloud native tools. 

Figma is led by its co-founder Dylan Field, who launched the company at just 20 years old after dropping out of Brown University and receiving the Thiel Fellowship. Field has guided Figma from its beta to a platform that serves millions of users and wins enterprise customers against legacy players. His leadership has been instrumental for the company, and he still retains significant voting control via a multi-class share structure, which could be both a stabilizing influence and a governance consideration for public investors. Other senior leaders include CTO Evan Wallace, who is Figma’s cofounder and is responsible for the platform's real-time collaboration engine. Also, COO Emily Del Greco, who was formerly a senior executive at Atlassian, where she oversaw the enterprise go-to-market scaling. The company’s leadership stems from known firms like Dropbox, Google, Stripe, and other quality SaaS companies. The leadership team has a strong record of shipping products, maintaining a strong culture, and scaling operations while preserving innovation.

In 2021, Figma surpassed $100 million in annual recurring revenue. A massive milestone for a design-focused SaaS. This led Adobe to attempt to acquire Figma for $20 billion, although the deal was abandoned due to regulatory scrutiny from the DoJ and the European antitrust dorks. Figma was able to pocket $1 billion due to the failed acquisition and enabled them to invest in product and international expansion. Figma successfully launched FigJam, which has gained rapid traction and broadened the platform's TAM beyond designers to include product managers, engineers, and other business stakeholders. Figma has also invested heavily in AI-powered features, a plugin marketplace, and integrations with other frequently used tools by working professionals. 

The design and collaboration software industry is going through a massive transformation driven by cloud computing, remote work, and the digital product boom. Historically, this segment was driven by desktop-centric participants like Adobe and Sketch. The market has fragmented into specialized tools that target different stages of the product life cycle. Unlike legacy nerds that require file uploads and asynchronous collaboration, Figma’s real-time multiplayer approach has set a new standard for speed and transparency. The company’s strong adoption amongst designers, combined with its enterprise sales, propelled the company into a leadership position within the design segment. Its expansion into whiteboarding and dev tools has cemented the company as a category-defining platform. 

Figma operates in segments that overlap within the design and collaboration tech stack. Its primary segment is interface and UX design tools, which is an estimated $10 billion TAM globally. The segments that include whiteboarding, where Figma competes with Miro and Mural, have a TAM of $4-6 billion. Also, the developer handoff and design system management has a growing TAM of $4 billion, and team productivity tools integrated into product workflows are also a growing market with a $10-15 billion TAM. As Figma evolves into a full-stack collaboration platform, its SAM (serviceable addressable market) and SOM (serviceable obtainable market) could exceed $15 billion over the next few years. 

Several powerful macro and secular tailwinds will propel Figma’s growth. First, the shift to remote and hybrid work accelerated the demand for cloud-native collaboration tools. Also, according to the dorks over at McKinsey, over 70% of enterprises plan to maintain or expand remote work, which may drive increased adoption of browser-based productivity software. Next, the expansion of digital products and interfaces across industries has elevated the strategic importance of design as a competitive differentiator. Third, there is a generational turnover in the workforce as purchasing power is shifting towards younger decision-makers, who prefer modern, collaborative SaaS tools over legacy shit.  

The pace of technological innovation in the design ecosystem is booming, driven by advances in AI, generative design, and automation. AI-powered design assistance has the potential to improve productivity and reduce time to market. Automation is reshaping how design and engineering teams collaborate. Real-time developer handoffs, auto-generating style guides, and one-click code export are replacing manual processes and bridging the gap between design and production. Although competitors like Adobe, Canva, and new AI native entrants are actively deploying capabilities to address these opportunities. However, Figma cooks faster, in the real-time multiplayer infrastructure space, and has a thriving ecosystem that creates a strong barrier to entry. 

End-user expectations around design and collaboration have evolved over the past decade. Designers, developers, and product managers are now demanding frictionless, browser-based tools that enable instant interaction and feedback. At the same time, purpose-driven business models are influencing purchasing decisions among enterprise buyers. Figma’s cloud native architecture minimizes hardware requirements and supports collaboration without expensive infrastructure. These shifts have helped Figma cultivate grassroot adoption that matures in an organic flywheel that continues to gather momentum. 

Figma operates a competitive ecosystem that is dominated by both legacy players and well-funded challengers. Figma’s largest competitor is Adobe, whose Creative Cloud suite includes Photoshop, Illustrator, Adobe XD, and more. These products have historically commanded a large market share in design workflows; however, Adobe XD has struggled to gain traction against Figma’s real-time collaboration and browser native architecture. Other competitors include Sketch, Canva, Miro, and Mural, all of which may offer a single product that Figma also offers. Despite a crowded landscape, Figma has been able to capture 30-40% of the cloud design workflows among enterprise teams. 

Figma has the first-mover advantage in the collaborative, browser-native design tools ecosystem, which is a major strength. Also, the company’s culture amongst the designer and developer community creates a strong brand affinity that competitors struggle to replicate. A major weakness for Figma is its concentration on its core design product, with FigJam and its other dev tools still in their early monetization phases. Figma has a significant opportunity to expand its global footprint and increase its market share in segments such as whiteboarding, as well as deepen its integration with engineering workflows, along with leveraging AI-powered automation. A major threat Figma faces is pricing and bundling battles from Adobe, along with the commoditization of basic design tools via new AI tools. 

Figma benefits from meaningful barriers to entry that come from its technological foundation and scale. Recreating Figma products requires substantial investments, and new entrants face engineering hurdles to reach feature parity. Switching costs are also large; enterprise customers embed Figma into their workflows, which are difficult and costly to migrate. Retraining teams, reestablishing design standards, and integrating tools disincentivize churn. These dynamics have driven high retention and make Figma’s customer base highly defensible against both legacy virgins and AI-driven startups. 

Figma’s financials are pretty fucking decent, in 2023 they reached $504 million in revi with revenue climbing to $749 million in 2024. A whopping 48% YoY increase, demonstrating strong demand and some mf’n product market fit. The company's gross profit margins are excellent, with gross profit growing from $460 million in 2023 to $661 million in 2024. This represents gross margins of 80-90%, substantially higher than legacy dorks like Adobe. However, the company’s operating losses widened as the team began investing heavily in product innovation and global expansion. 

Figma’s balance sheet is strong among its high-growth SaaS peers. The $1 billion Adobe breakup fee significantly boosted their finances, providing them with a substantial war chest to fund ongoing operations, R&D, and potential acquisitions. Figma has no long-term debt. Other liabilities include lease obligations and expenses related to scaling operations. With low leverage, a huge cash position, some bitcoin ETFs on the balance sheet, and a clear path to improving operating leverage, Figma has ample room to cook and pursue international expansion. 

Figma’s cash flow trajectory indicates that it is rapidly approaching self-sustaining economics. In 2023, net cash from operating activities totaled a substantial $1.05 billion, primarily driven by the Adobe breakup fee. Excluding the fee, free cash flow came in at $92 million despite high R&D and sales investments. In March 2025 Q1, Figma reported a free cash flow of $95 million, showing strong momentum in the right direction. The company’s rapid growth trajectory, strong profit margins, and robust cash generation create a clear path for sustained profitable growth in the long term. 

Figma’s current profitability profile renders conventional earnings multiples less relevant, as they have not yet been exposed to the public markets and don’t have years of public data available. However, with gross margins exceeding 87% and improving free cash flow margins, Figma is an attractive long-term investment. Assuming revenue surpasses $1 billion over the next 12 months, Figma is expected to command a 15- to 20-times EV/Revenue multiple at IPO. this compares favorably with other SaaS leaders like Atlassian, Snowflake, and Datadog. While headline valuations may appear to be high for figma, its premium reflects Figma’s top-dog platform, best-in-class retention, and large growth opportunity in the long run. 

Figma is still in its growth stage and will be focusing on reinvesting cash into R&D, growth, and infrastructure over returning capital to shareholders. Although Figma currently has $70 million of bitcoin ETFs on its balance sheet, with clearance to buy $30 million more. In the long term, Figma’s balance sheet is growing, which enables management to be flexible and make potential acquisitions in categories like developer tooling. The company’s capital allocation strategy is currently prioritizing expansion and building differentiated AI capabilities to widen its moat. 

Figma’s organic growth has been driven by continuous product innovation and a relentless focus on expanding its platform. The introduction of Figjam and other products has been successful. Enabling Figma to capture workflows that have traditionally been dominated by other competitors. Over the next few years, Figma plans on deepening its AI capabilities, such as automated design suggestions, content generation, and asset tagging. These will hopefully improve customer retention and also upsell opportunities as enterprises adopt more advanced features. While the U.S. remains the largest revenue contributor, international markets represent a huge market for Figma. The company has been scaling its GTM teams in Europe, Asia, and Latin America to capitalize on the global adoption of remote work and the acceleration of modernized work infrastructure. 

Figma benefits from the global shift to remote and hybrid work, which is driving major investment in cloud-native infrastructure tools. McKinsey predicts that over 70% of enterprises will expand remote work capabilities. Regulatory trends also could favor Figma’s growth as enterprises are facing rising compliance standards for accessibility, data residency, collaboration, and cloud-native platforms with robust security. As well as the democratization of design among non-designers is expanding Figma’s potential user base. Over time, Figma can benefit from its increasing scale, pricing power, and automation, all of which will drive free cash flow and its margins. 

As a SaaS company, Figma’s growth does not depend on physical shit, but on scaling its digital infrastructure and distribution capabilities. Primary investments are made in talent. In 2024, the headcount scaled to support the next generation of AI features and developer tools. Figma has also begun building dedicated sales teams in EMEA and APAC to unlock serious fucking value and improve post-sales support. Its R&D pipeline is strong and represents critical growth. Management has prioritized AI and machine learning to predict user flows and automate compliance. These capabilities will further entrench Figma's critical system, deepen customer retention, and create meaningful upselling opportunities. 

Figma runs an asset-light SaaS model, with the company’s infrastructure depending on third-party cloud providers. Figma cuts a fat monthly check to AWS and has plans to purchase a minimum of $545 million in cloud hosting services over the next five years. Execution risk is also heightened by Figma’s rapid organizational scaling as the company's headcount grew substantially, as the company raced to build AI-powered design and developer integrations. Founder/CEO Dyland Field remains the driving force behind Figma’s strategy, product vision, and culture. While his leadership is a key strength, it also creates a key man risk where, if he steps back, the company could fail to sustain growth and execute on all levels. 

Figma’s expansion into global enterprise accounts exposes them to regulatory and data privacy standards. Regions like the EU impose strict GDPR compliance and data localization requirements because they are cowards. Additionally, governments are intensifying scrutiny of cloud platforms and cross-border data flows, which could lead to tighter regulations. As the market matures, Figma may need to balance pricing discipline against customer acquisition targets, potentially weighing on gross margins. Enterprise software cycles have lengthened during downturns, and budgets have often been the first to be scrutinized during cost-cutting initiatives. 

Figma’s valuation is currently expected to be between $15-20 billion. Should growth decelerate faster than expected, the company’s valuation could take a large hit. Investors should be prepared for significant share price swings in response to earnings, macro shocks, or high expectations built into the hype around its IPO. If new market entrants or competitors build strong products, Figma’s revenue could take a hit well below expectations that are currently assumed by investors. 

Figma isn’t a public company yet, so there is no livestock price or official valuation, so investors estimate based on similar software companies’ trades and Figma’s potential growth. Assuming revenue continues to grow and margins strengthen, Figma could eventually achieve EBITDA margins in the 25% range. To cross-examine, one can look at Figma’s valuation against other publicly traded peers like Atlassian, Snowflake, and Monday, which have traded between 10-20x forward revenue. 

The boys will be analyzing three potential cases. In a bullish case where revenue accelerates to $4 billion by 2030, representing a 33% growth rate and margins expanding to 30% which could imply a market value of over $50 billion. In a base case with the steadiest execution and modest growth, investors could see a chart with a flat line over five years. Although if growth slows, margins are suppressed, and competitive pressure rises, Figma’s valuation could drop to $5 billion. While the underlying business fundamentals are currently compelling, shit changes, and investors need to recognize that Figma’s valuation range is wide and dependent on whether it can sustain its growth. 

Over the next few years, several catalysts could drive renewed momentum and support Figma’s long-term growth. Figma is expected to accelerate large enterprise customers across Europe and Asia as design teams consolidate into a single system of record. The company has also begun rolling out advanced AI-powered tools that will automate core workflows, which could unlock premium pricing models and strengthen the firm's moat against competition. If Figma can scale revenue and strengthen margins, the company’s valuation could exceed $50 billion over the next few years. Investors should also watch for competitor displacement from Adobe, Canva, or AI-first players that could erode Figma’s moat. 

The bad boys over at Azar Capital Group will be giving Figma a ‘BUY’ rating due to its leadership in cloud native design software, strong gross margins, and capital to fuel their growth. Figma has established itself as the go-to platform for collaborative product design, which gives creatives a strong competitive advantage. We believe that over the long term, Figma offers an attractive growth opportunity for investors looking to gain exposure to the SaaS sector. The company combines strong financial fundamentals, a strong product, and multiple growth levers that can sustain serious growth over time. Investors with a long investment horizon should be drooling at the chance to own a generational platform early in its public life. 

Disclosure

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