Case Study

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September 21, 2022

VC Investment Case Study: Figma

On September 15, 2022, Adobe announced that it would acquire Figma for c. $20B. This is the largest exit ever of a private technology company (bigger than FB’s acquisition of WhatsApp). Index Ventures’ Danny Rimer wrote the seed cheque back in 2013. As seen below, that investment will generate a 450x multiple.


Figma’s story, and that of its founder Dylan Field, is fascinating. We have tried to highlight 4 elements of the story that provide insight into the real business of Venture Capital:

  1. Top-Tier VC’s are Part of The Inner Circle

The Valley, and other tech ecosystems, create a virtuous circle between entrepreneurs, investors, and tech execs. Danny first met Dylan at a Flipboard board meeting, where Dylan was giving a presentation. Similarly, while interning at LinkedIn, Dylan worked with DJ Patil (U.S. chief data scientist and early exec at both RelateIQ - acquired by Salesforce; and Devoted Health - $15B valuation) and Adam Nash (CEO Wealthfront; founder of Daffy). Both became value-add Angel investors. Being tied in to the tightly knit LinkedIn mafia, Danny had Dylan in his sights long before the rest of the VC world.

  1. Top-Tier VC’s Pick The Winners

Dylan met with a bunch of top-rated investors before he started Figma, but only Danny Rimer called Dylan back the same night on the day he had heard Dylan’s pitch - and told him “I am in”. Dylan’s pitch was not a PowerPoint deck with 10-year projections, but rather a demo showing how a small technical change to the standards used in web browsers (WebGL) meant that complex graphics could now be viewed on browsers. This meant that for the first time, web-based design software (SaaS) could compete with graphics-intensive, desktop-software. Danny didn’t need to be educated about the market opportunity or the dynamics of the industry – he had a prepared mind and knew the potential for design in the cloud. He also understood the power of WebGL – and the disruption that collaboration would bring to the industry. In his mind, product design and development required at least 2 people to work together. The incumbent’s software was built for individuals to work on single files…clearly the wrong tool for the job. Danny was quickly able to reference Dylan using his Premier League network. This gave Danny the conviction to get his partners over the hump and back Dylan - a college-dropout aiming to disrupt the behemoth Adobe.

  1. Top-Tier VC is Not Scalable

Performance is driven by 10-20% of the portfolio companies – the fund-returners. Index owns 13% of Figma across various Funds. This ownership level means that Figma will return the respective Fund multiple times over. You can only achieve that type of ownership by getting in early. As we saw above – getting in early depends entirely on the GP (partner in the fund). The problem is that a GP can only back a couple of companies per Fund because he/she needs to sit on the board and devote a ton of time to the start-up. Aside from advising on strategy, Danny rolled his shirt-sleeves up making intros, recruiting A-players, and closing rounds. The best Venture firms have understood this and cap the amounts they raise to the roster of star-GP’s in the partnership.

  1. Top-Tier VC’s Benefit From a Flywheel

The best entrepreneurs seek out the best GP’s because those GP’s add the most value. The best GP’s join the best Venture firms because those firms have the most powerful brands & deepest networks – ensuring that the GP has the highest probability of seeing & backing the next era-defining start-up. The best Venture firms attract the most dependable capital, thereby cementing the firms position in the industry.

There are many other insights to be gained from the many testimonies and stories on Figma. Here are a few links you might enjoy:

The Story of Figma: Collaboration, Community and Creativity

Dylan Field pitches seed-stage Figma to Daniel Gross

Figma: A Random Walk in Palo Alto

How Dylan Field Won Over the Haters

Figma Growing Inside Microsoft Testing Longtime Deal With Adobe

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The content of this article has been approved and issued by TOP Venture SA for information purposes only and does not purport to be full or complete. The information and opinions contained in this document are for background information and discussion purposes only and do not purport to be full or complete. No information in this document should be construed as providing financial, investment or other professional advice.

Disclaimer

THIS ARTICLE CONSTITUTES AN UNOFFICIAL SUPPORT OF THE TECHNOLOGY OPPORTUNITY PARTNERS family of funds (HEREINAFTER THE “FUNDS”).


The content of this article has been approved and issued by TOP Venture SA (hereinafter “TOP”) for information purposes only. The information and opinions contained in this article are for background information and discussion purposes only and do not purport to be full or complete. No information in this article should be construed as providing financial, investment or other professional advice. This information contained herein is for the sole use of its intended recipient and may not be copied or otherwise distributed or published without TOP's express consent. No reliance may be placed for any purpose on the information contained in this article or their accuracy or completeness. Information included in this article is intended for those investors who meet the Qualified Investors definition of the Collective Investment Schemes Act of 23 June 2006 and its ordinance and the Financial Conduct Authority definition of Professional Client or Eligible Counterparty. 

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