FULL TRANSCRIPT

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Speaker 2 (00:00)

Thank you, everybody, for joining. I'm very excited, as always, for today's episode. This is the next in the pre-IPO series, and we're going to try something new today. We're going to take the pre out of that sentence, which is the Just IPO series. So my name is Slava Rubin. I'm one of the founders here at Vincent. You can check it out withvincent.com for all things ⁓ education and access for alternative investments. And of course, we love talking pre-IPO.

And with me today, one of our favorites, Jan-Erik from Sacra So Jan-Erik, say hi.

Speaker 1 (00:31)

Thank you Slava and great to be back.

Speaker 2 (00:33)

Absolutely. So today we're going be talking about Figma, the company that just went IPO very recently, the design company, which many people are talking about, should you buy the stock or not? We're going to follow our typical format, which is really discussing what is the company, what's its future prospects. And we always like to say, what's the right price to get into and work it ahead. And that only becomes that much more interesting today because we're talking about a company that while we're on this call, you can go buy if you'd like. And that's the first time we're ever doing this.

So before we start moving forward, let's, you know, a word from our compliance department, which is nothing in this presentation should be construed as an offer to sell securities or solicitation of an offer to buy securities. All investments involve risk and possibility of loss, including loss of principle and neither past performance nor forward looking information is in guarantee of future results. All right, moving forward with that said, we're going to let Jan-Erik

give us the overview as to what is Figma and what's the current context. As a reminder, we do have the Q &A section. So there's the button that if any of you want to start adding questions, I will do my best to filter through all the questions and identify the ones that will pull forward and ask as part of this live conversation. Jan-Erik take it away.

Speaker 1 (01:46)

Awesome. Yeah, Figma, if you're not familiar with, was founded a little over a decade ago. And if you think about where we were in technology at the time, we were about 10 years into things like Gmail and Google Maps. And really understanding Figma as a product and why it was important, it's good to understand how Gmail and Google Maps, things like that, really changed the web, where you suddenly had

In your browser, you had these live updating, live reloading experiences that were also potentially collaborative with something like Google Slides, where you could see other people's cursors on your screen. And that was really a big sort of change in how modern web applications were built. So fast forward almost 10 years after Gmail's launch, what we get with Figma is basically Gmail for design. So instead of being

a designer being on your computer doing Photoshop or using tools like Sketch to put together a UI mock-up for a startup product. You could do all of this online, basically, Google Docsify it and have collaborators from your team working on the same screen, working on the same project, see their cursor moving around without having to be sort of sending files around, right?

uploading files to Dropbox or sending them via email to each other just to coordinate edits and changes. So that was really the original impetus for the company. Founder Dylan Field was dropped out of college to do this. Thiel Fellow, believe, one of the early ones and clearly one of the most successful ones. yeah, this Photoshop as a browser or Photoshop in the browser has took off.

In a major way, there was a sort of acquisition attempt by Adobe that we can talk about more that didn't happen. And now here we are, know, they've gone public. It was the biggest tech IPO of the year by some margin and really interesting, operationally efficient, you know, high gross margin, exciting software business. it feels like we're kind of, we're back, you know, the glory days of tech IPOs.

And yeah, the product has expanded significantly beyond kind of the original use case, was designers having tools to build the front ends of applications. So they launched FigJam, which is kind of a whiteboarding application meant to bring in other members of the team and expand seats beyond just the design team and also take on things like Miro, which were getting popular at the time, which we'll talk about more.

And then various other products. So Figma slides, obviously taking on the more, know, quotidian Google slides, PowerPoint use case, and going after things like Canva to some extent. And then you've had them sort of go deeper into engineering and development workflows with DevMode, Code Connect, designed to bridge the gap from, you know, having a nice design to actually deploying it live on the internet. And then I think AI is a big one that we need to talk about as it relates to product, but also competition.

because they are doing, they're launching AI stuff, especially over the last two or three months, they've really gone hard launching AI products and features. And I think that's one of the clearest potential disruption vectors, but one that they're clearly looking at and working on themselves.

storied history in the private markets, you know, they had top investors, Andreessen Founders Fund, Kleiner Perkins, Greylock, and raised, yeah, about three quarters of a billion dollars up to a private valuation of 12 and a half billion in a tender in July, 2024. And at the moment, I think we're a bit up from when I made the slides, 39 billion market cap or up to 40.

0.8 billion. So that's the sort of number that we're anchored on for today's discussion to double what they were supposed to be acquired for acquired by Adobe for back in December, 2023. So I think that sort of, yeah, maybe sums it up and gives us a place to start talking from.

Speaker 2 (05:36)

OK, perfect. So thank you for that context. really, we're talking about, for all intents and purposes, a SaaS company. So it's a SaaS company in the design space. Typically, when people are thinking of design, I would imagine one of the first companies they think about is Adobe. So you mentioned this, which is now already they're competing with Adobe, and Adobe even tried to buy them.

So can you give a perspective on, again, the competitive landscape as well as how their products are evolving, you said very quickly. So let's start with the competitive landscape and then the product evolution.

Speaker 1 (06:15)

Awesome. Yeah, so let's talk about Adobe first. you know, Adobe obviously recognized that the cloud was sort of emerging as an important place for apps to live, know, web apps working in the cloud versus just locally on your computer. And they launched Adobe XD, which, you know, is the biggest sort of non-Figma design tool that designers use. And it is roughly the same basic idea as Figma, which is you could do

wire framing and create prototypes if you're a designer in a web-based interface. And their kind of secret weapon here is that a lot of design teams are already paying for the Adobe Creative Cloud bundle and Adobe XD just gets included in there for free. this is basically the Slack versus Teams dynamic where Teams, Microsoft tried to...

destroy Slack by giving away teams for free within their bundle. That was relatively successful in terms of fending off Slack. We didn't see the same dynamic with Creative Cloud, Adobe XD versus Figma. And a lot of that is because Figma from a product perspective, simply won with a better product and created this kind of, we called it intolerant minority. designers within companies,

are much like engineers. And when they get opinionated about a product, they will sort of not accept what they consider an imitation. There's very strong cultural resistance to the idea of using, just using a bundled tool when Figma is, to them, two, three, four, it's better. products have been sort of the key vector between them and Adobe. That's been really important.

then know, Canva, Canva is sort of adjacent, Miro sort of adjacent, but.

Speaker 2 (07:58)

I'll really quickly, So when you think about all the various competitors, you already mentioned some of them, right? There's Miro, Canva, and all this Vibe coding. I would love to have you kind of portray what is that market and the team that we're talking about here.

Speaker 1 (08:16)

Yeah.

Speaker 2 (08:16)

And the competition, the way you're already going into it.

Speaker 1 (08:19)

Yeah, yeah, yeah. So, Canva, like I said, Canva and Miro are sort of the closest comps for Figma, but they're slightly adjacent where Canva lives more on the marketer side, more on the content design. They started out doing social media kind of banner images and Miro is on the whiteboard side, more for the kind of product manager collaboration use case. And Adobe has products in all of these different areas.

Figma is on its way to trying to eat all of them up as well. know, Figma has their own slides product. Figma has their own whiteboarding product. Figma is used by marketers, salespeople for creating collateral for social media and for web content. And they're doing more on that with AI as well. it's a landscape that's dominated generally by Adobe, you know, who are still

if you look at their revenue, the revenue scale, it's 21 billion in revenue. So they're the giant gorilla. And you kind of have all these smaller players with Figma being, you know, kind of trying to take the share from these other quadrants.

Speaker 2 (09:27)

You mentioned a great point there, 21 billion of revenue for Adobe. Can you give us some context on the revenue that we're talking about with Figma?

Speaker 1 (09:34)

Yeah, definitely. for the full year of 2024, they hit 749 million in revenue. That was up 48%. And then they ended Q1 with 913 million ARR. They're at or tracking for a billion as of last quarter. So yeah, it's much smaller than Adobe, smaller than Canva as well, which is at 3 billion, roughly ARR.

but some very impressive financial metrics, really high gross margin, 91%, really good net revenue retention. Right now they are the best among public cloud companies in terms of that. Also second best in terms of just pure top line growth. CAC payback right now, 18 months puts them top decile and then yeah, free cashflow margin 28%. So it's been a sort of.

Yeah, impressive set of financial metrics on their IPO.

Speaker 2 (10:34)

Yeah, I think people talk about the rule of 40, the combination of growth and profitability. These guys are like 63 or something. So like a really strong number that a lot of people are talking about as it relates to SaaS, the rule of 40. If we go back to the competition side for a second, you know, the comparison of like 1 billion of revenue versus the 21 billion of revenue for Adobe, and then you layer in these other competitors. Let's just talk about the revenue makeup there and what's the kind of the prices. have Adobe.

at approximately, I'm using round numbers here, about $150 billion market cap. have Figma now at around a $40 billion market cap. You have Miro off of approximately 560 million revenue in 23 that you're reporting here, like a $20 billion market cap. And then Canva, which is quite competitive probably.

to really think about Figma. They're doing two and a half billion of revenue and last valued at around 26 billion. So I really like how you're even visualizing because Adobe is three to eight times bigger than any of these companies, but they're all kind of coming around the edges and starting to eat at it. What's interesting, and this is...

something that we could benefit from the fact that it's a public company now, as opposed to just talking about private. If you look at the Adobe stock chart, which we don't have a visual for this, but anybody can just do it now real time. know, the market has been crushing it. We're at like all time highs. Companies like Nvidia are like out of control. Palantir has obviously gone straight up, but Adobe is actually down for the last year. Adobe is down like, I think like 35%, which is really interesting.

And another perspective is if you look at the five year chart, obviously you have COVID pop in there and then it comes down. is down for the last five years, 23%. So I think what the VCs and the investors are all thinking is are we eating away at Adobe? Meaning is Adobe slowly going away? Now that I think is something you need to think about as an investor, as a listener and make your own decision on this perspective.

What's your quick thoughts on that, Jan-Erik?

Speaker 1 (12:51)

Yeah, I think that that's definitely, know, Canva continues to be, you know, I mean, we'll probably do a IPO conference on them at some point, you know, in the not too long future, because I think it's a huge business doing really well. Miro, you know, maybe less so slightly more flat, but I do think there's been momentum about companies eating up some of Adobe's key, you know, use cases.

I think the other side of it is too that this fear that investors have about AI eating software, I think is really, powerful with Adobe. And that narrative is really hurting them right now, especially as you see the other competitors that we haven't talked about yet, these AI native coding tools and AI native design tools, which is what they essentially are as well.

are sort of even accelerating this, know, eating up to an even faster pace, which I think is probably a lot of what is hurting stock price right now is this, yeah, expectation that AI is disrupting Adobe faster than Adobe can really build out its own compelling AI features, which could cannibalize, you know, these extremely profitable revenue lines that are linked to, know, per se, SaaS.

subscriptions.

Speaker 2 (14:15)

mean, this is probably gonna be a hard question for you to answer, really, for anybody to answer, but why is it that certain public companies right now are getting the benefit of AI helping their companies and other companies like Adobe are getting kind of eaten up a little bit that AI is gonna take away their company? To be very specific, you can look at a company like Duolingo, which is the translation education company. AI can try to teach you languages. People at first said Duolingo is gonna be going into the crapper.

And now everybody's saying that AI is only helping Duolingo grow, grow, grow. And on the flip side, and obviously meta, people are saying, you know, they're all over AI and it's helping them grow. If you look at Adobe, it looks like the AI narrative is not helping them at all. So what's your perspective on that?

Speaker 1 (15:00)

Yeah, think, yeah, Duolingo is a great example where, you know, I think AI kind of unlocks this potential world where Duolingo can, it's a content business, right? Essentially. and it, with AI, can potentially generate a sort of infinite supply of content. I don't know how much Duolingo has looked at expanding outside of, you know, language learning, but like even that, you know, even that becomes a possibility, you know,

expanding into, I don't know, code, whatever else. I think they do have math, chess, and music, but sort of expanding content while also potentially reducing the cost to generate that content with AI drastically. So I think that's a really compelling story for a lot of companies that can say, hey, AI can make us a lot more efficient and potentially improve our offering to people in huge ways.

I think the flip side with Adobe is they are a very traditional SaaS player. These per seat monthly subscriptions that companies pay for are really the, you know, this cash cow. And if, you know, per seat starts to go away because companies can get so much more done kind of autonomously with agents or just with fewer humans who are enabled to get more stuff done faster.

it starts to really bear down those kinds of, those SaaS companies that are really selling seats and selling human labor.

Speaker 2 (16:23)

So just to give perspective on price here, Adobe has 21, more than 21x the revenue, but the market cap is only three and a half times larger.

So really the price multiple is today you're paying six times more, six to seven times more for the earnings revenue for Figma, which just shows both the expectations of growth and potentially a little bit of the excitement that might be too much or not enough. It's all your opinion. What do you think of the TAM? Is this TAM all getting bigger or is this just

a stable TAM that everybody just needs to take their share and take it away from everybody else? Or is this TAM going to get substantially larger with all these trends?

Speaker 1 (17:12)

Yeah, I think it's definitely growing. And AI has opened it up, has definitely opened it up. It's not just for, I it's not just for designers, right? It's potentially important for how companies actually build websites, deploy them, helping non-technical users do that kind of task. But do I think it is...

Justifying what we're seeing with the activity right now and the amount of hype around it. I'm not sure. I still think it's fundamentally kind of a design tool. I do think that we will have, like if you had to ask me in the next five, 10 years, I think the rate at which this design, know, TAM is expanding will probably accelerate a little bit because of AI making it so much easier to launch.

launch products, launch websites and apps and making the design side of it kind of more, like there's more people that need design. At the same time, AI doesn't really do the design for you. It still requires some human effort, at least right now. So I do think the TAM has sort of expanded or the growth of it has expanded, accelerated, but yeah, I would say it's not.

expanding massively beyond kind of that initial group of sort of signers, product managers, marketers.

Speaker 2 (18:35)

If we could go back to product, can you just remind us which product is their core product? Like what's the main horse that they bet on? And then what are they expanding with? Like which of those products? I know they've been bringing out several. Is there concern that there could be like almost product sprawl and not enough focus? Or is this just a great kind of networking effect of already getting the designers for one product and extending these other ones? Which ones are getting momentum? Which one was the core one that they started with?

Speaker 1 (19:03)

Yeah, yeah, Figma Design is the core and that is, you know, from surveys, it has 80 % market share. So, I mean, you could never have hundreds. So, I think 80%, it's pretty clear to see that this is the dominant kind of tool that designers use.

Speaker 2 (19:19)

Meaning who are they beating in that 80 %? Is that Adobe?

Speaker 1 (19:24)

That's like Adobe XD. like another company called Sketch, which was a big design tool a while ago. Yeah, exactly. So, so Figma design is kind of the key thing. And I think it's how they land and how they stay inside the organizations. And then once they're there, there's the opportunity to start bumping up their kind of attach rate, bringing in more people from other parts of the organization.

on different kinds of seats that can come in to collaborate with those designers and do their own work as well with things like slides and whiteboards. So those are ancillary products that help bring up their revenue but aren't core like Figma Design.

Speaker 2 (20:06)

And do you have a sense of what percentage of the revenue, the approximate $1 billion, what percent of that is the core product, Figma Design versus the other ones?

Speaker 1 (20:14)

Just because of the price, it's not clear. They haven't released any information on that. But I would say in terms of attribution, Figma Design probably drives probably close to 80 % of the revenue the same way just because of how important it is to their business.

Speaker 2 (20:31)

Got it. And then there was a question about the competition slide. Where would you put like Runway or Luma as comps to Figma?

Speaker 1 (20:37)

Yeah, so I think that there are potentially, you know, in the future, you could sort of imagine a world where generative AI, because of how we're seeing both text to image and text to video, both becoming so powerful at the same time and so prolific, you know, 2025 is sort of shaping up to be this year of AI video. I think there's a world where that becomes another big, you know, sort of slice that we're competing over with the amount of video content that we could expect to see in

Yeah, and B2B use cases, B2B marketing, that kind of thing. think right now I do, I like having them in the competitive diagram, but a little bit more speculative.

Speaker 2 (21:17)

Got it. So for all your listeners, again, if you have any questions, feel free to just ask them in the Q &A. Let's talk about the tailwinds and the concerns. When you think about investing today, what are the tailwinds that can get you to significant growth and what are your top concerns? Here.

Speaker 1 (21:32)

Yeah, think definitely a tailwind is this kind of AI-powered proliferation of basically websites, apps, and just new interfaces online and on the phone. I do think that these kinds of vibe coding tools that we sort of mentioned briefly are really great at spinning up code and workable applications.

The design side is often very lacking. So I think that as we see this explosion of new web interfaces, there will be a need for design for those to look good. I think Figma stands to benefit from that, especially as they become one of these engines of that sort of vibe coding proliferation as they're trying to do. They have their own kind of product that is competitive with your lovable, your Vercel

V0, your replate agent, that's a little more design-centric, but it is roughly the same kind of product. So I that's a big one. think on the opposite, in terms of the sort of risks, I see that AI potentially also being a risk. I think this is a little bit further off, and I'm not sure if tools will get to this point.

But there's been this narrative going around, I can sort of buy it, which is that because, know, vibe coding, and I say that now, including both kind of, you know, these tools we talked about, as well as Anthropic, OpenAI, Google, Cursor, the argument is kind of that they make it so easy to prototype and spin up applications that you don't really need a design team anymore. You can sort of design in real time, you know,

by pushing changes via AI, seeing what it looks like, and then making adjustments with natural language. And so there is a world where potentially design becomes redundant as a result of just how fast, velocity the engineering process becomes, where you don't even need a separate design tool, which it's possible, but I think a little further off.

Speaker 2 (23:38)

Let's be provocative. So do you think Figma buys a Vibe Coding company and tries to layer that into their offerings?

Speaker 1 (23:47)

That's interesting. think potentially, because if I look at what they have, and I tried building myself a little site using Figma's tool, it's all kind of there except for, it's not really built for designing full stack apps. It's more for the front end prototyping. You don't have a deploy option to send it to the web. So I think that would be a really interesting purchase, especially because these

individual live coding platforms like lovable, bolt.new, they're not part of a platform and they could potentially be more interesting as part of a Figma where they're looped into a bigger workflow that involves a lot of the people inside a company versus being sort of these standalone businesses.

Speaker 2 (24:29)

So had a question, what is Vibe coding? The young kids these days, they like using the word Vibe, because it's more about the vibes than it is about the facts. So these different companies that are AI coding, they allow you to code without having the technical capabilities of knowing how to code. So you're to use these large language models, often on top of Anthropics, Cloud, and others, that by just putting in your prompts, it actually does the code for you. And they then categorize that

group of companies, i.e. Cursor, Replu, Lovable, Windsurf, etc. that are listed on this slide as a category called Vibe Coding. Jan-Erik would you add anything to that?

Speaker 1 (25:06)

Yeah, I would add that it was coined by an AI engineer who's actually 38 years old. So I should explain it when I use it. But I think that's basically a good description.

Speaker 2 (25:17)

Okay, great. And you know, it did just IPO. So let's transition to talk about price and what it means to IPO. This is our first time taking the pre out of our pre IPO series and really it's an IPO series. So let's just compare how did this IPO pop versus the other IPO recently. So yeah, give me your perspectives on that.

Speaker 1 (25:35)

I mean the chart. I mean, it of says it all, right? This is the chart of in green, what the market cap of the last sort of six months of major tech IPOs looked like. And then in purple, what it looked like at the end of day one. So if you look at basically every IPO pre-Figma, the biggest pop was Circle, which went public at just under 7 billion. Everything else had a small pop, if any.

Yeah, Figma, as you see quadrupled on the first day of trading. So there's an argument that they priced it potentially too low. There's an argument that it was just sort of a really sort of easy company to understand and get attached to and great metrics. so it was a lot of enthusiasm. I think both are probably true to some extent, given Figma I think was trading higher than 19 billion on secondary markets.

right before their IPO, probably could have seen it, you know, seen the pop coming to some extent, but yeah, definitely the most kind of exuberant IPO that we had this year.

Speaker 2 (26:34)

I mean, what's interesting about the price for Figma is we actually already had a buyer about a year ago, which is Adobe, which was ready to buy it for around $20 billion. So they obviously had serious incentive to figure out how to price it accordingly. And you'd imagine that they already put in a little bit of increase because they have to overpay to buy a company that's doing well. So they were buying it at 20 billion.

Obviously that deal fell apart. One thing that people don't really keep in mind is that as part of the breakup fee there, Figma got $1 billion of cash, which was super helpful as part of driving forward growth for Figma. They then used that cash on the balance sheet, moved forward into the IPO. The talk of the IPO was there was going to be around $20 billion price, i.e. the green thing here, market cap at IPO 19.3.

totally fair, kind of vanilla price versus Adobe. It's what it was trading out on the secondary. And all of a sudden it pops to go to a $67 billion market cap. So, I mean, what's the takeaway there? I have opinions, but I would love to hear you say that again.

Speaker 1 (27:46)

Yeah, I mean, it became a meme stock, you know, to some degree, you know, people, for whatever reason, caught, you know, it sort of got pumped up in the way that stocks were a few years ago on Robinhood and places like Reddit, where people are talking these things up. And so to some degree, you know, it did explode in that sense. And then, yeah, I think the Adobe acquisition, you know, not happening definitely was a big

moment that people look back on now and think, well, clearly, that was a low price because Figma just exploded past that. it is worth looking at their performance since then. think that was the of 2023 that they were supposed to be purchased by Adobe, growing 48 % year over year, continuing to grow really fast, I think. Yeah.

just performing really well. And I think the jump has a lot to do with that as well. But yeah, what were you gonna say? What did you think?

Speaker 2 (28:45)

I mean, as a convergence of a confluence of a lot of things, I think that the bankers really gave the benefit to the investors, not to the company. I think as we're looking at interest rates coming down, you're starting to see meme stocks come back and you're seeing a lot of risk on activity. You're seeing the markets at all time highs. You're seeing Bitcoin and ETH, you know, coming to all time highs. You're seeing a lot of risk on. And I think people wanted to kind of, quote unquote, bet on the risk and ride the momentum.

So yeah, we're going to talk about the exact price here in a second. But can you give me your perspectives on keep in mind that this has come down from 67 billion to about 40 billion today. So if you're jumping in very quickly as part of the IPO, depending on the price that you got, if you got the actual IPO price, you're obviously up. But if you were part of that momentum early, you're quite a bit down. So then you're wondering, should I come in? Should I come out? What should I do? We'll talk about the exact opinions we have in a second.

We do have a question here, it's a little bit more technical, but as chat GPT becomes more robust and broadly accessible, what does this mean for the big bet Figma is making on AI with tools like Figma make, meaning their vibe coding, especially considering their opted to build on Claude instead of GBT. Any opinions on how they're moving forward on their own vibe coding play and how they're trying to integrate into developer stacks?

Speaker 1 (30:04)

Yeah, I think they have the benefit of optionality, you know, as they are not sort of beholden to either one, where they could change to GPT-5, right, if they wanted to, if it was better. It is about 50 % cheaper than Claude. So, you know, there's some boost to the gross margin of serving that if they did switch. I think what they'll do is just pick the best model at the time that generates sort of the best output. And that has been Claude since basically the middle of

2024, so I think they'll stick with it as long as it's the best. I do think, know, try GPT becoming better, GPT models becoming better, should be a boon to Figma because the reason you would use Figma's development tools is if you are designing things in Figma, if you are a company that has, you know, designed your sort of design language, design system in Figma, you have all of your colors, all of your sort of components.

Figma Make is gonna be able to use those to spin up new pages and new features for your product and what they should look like. So it's actually integrated into your design workflow in such a way that chat GPT is not and Claude is not and really none of the design tools have depth of integration that Figma can do natively. So I think any improvement in the models should be good for Figma. The other AI component that I didn't mention, which I think is quite cool, if someone can use this Figma.

is they're really building in a lot of non-LLM AI around images and video. And just one of the examples is kind of there's on the fly image generation and on the fly image editing with AI in Vigma now, and also like removal of backgrounds, stuff like that. So we've seen some of those use cases really take off with individual products over the years and now with AI.

And Figma is sort of quietly and slowly bundling them all into their core Figma design experience where it becomes less about, it's almost like you can do vibe designing now to some extent. So yeah, I'd say that's my thoughts.

Speaker 2 (31:59)

Awesome. Let's move on to projection. So give me your perspective on the base, bull, bear case as to what this all can become.

Speaker 1 (32:05)

Yeah, think by, you know, given we sort of know what Figma is, it's not massively changing, you know, its sort of stripes. It's really a core design tool with these collaboration capabilities. My Bear Base and Bull are maybe a slightly narrower band than on previous, you know, previous companies we've looked at. you know, I think the bear case kind of goes to what I was saying about AI commoditizing some of this design work potentially.

and potentially the need for design itself, not expanding as quickly as expected. The base case is kind of a continuation of where we are today, continuation of Figma having this 80 % market share as tech continues to grow and expand and Figma stays kind of the standard bearer. And then I think the bull case kind of hinges on Figma really differentiating itself as a place

to actually go end to end and build and design web apps and open that up to non-technical people on the team and really make the process of getting a, know, vibe coded website that looks correct for your brand, looks correct for your company, much faster and much more efficient. I think there's a world where they become this, you know, AI, no code app builder.

⁓ And that really helps them expand within organizations. think in the medium term here, I think that that basically would elevate them up to potentially this like five and a half billion ARR versus like three and a half ish in the bear case. think it's roughly stable as a business, but kind of know where it's going, but that's sort of the degrees of different sub scene.

Speaker 2 (33:40)

And what's interesting is today we're talking about closer to just under a billion dollars, right?

Speaker 1 (33:45)

Yeah, in terms of ARR

Speaker 2 (33:47)

Yeah, and but at evaluation, which is around 40 billion. So we're really talking about almost like a 45 X multiple at the moment. If you want to be, you know, nice, we'll call it a 40 X multiple. So today's multiple is significantly higher than your bull case. Is that correct?

Speaker 1 (34:02)

⁓ Yeah, maybe someone can explain it to me, but I don't know necessarily why. Figma, trading a 45X, it's the second highest ⁓ in public markets with cloud companies, just behind Palantir, which has obviously had an insane run. So I would say, yeah, the multiple right now seems pretty high.

Speaker 2 (34:21)

I like how you say that with a very straight face. So what's your perspective on investing today at $84, $41 billion market cap? Are you buy, sell, hold today?

Speaker 1 (34:37)

yeah, definitely. You know, if you got in at IPO, that's great. I think Figma is, I mean, I think it's a great product. In fact, I use it for almost every visual that I show in these slideshows, that we do. I use it constantly as a non-designer. I think it's a great product. And I think Dylan Fields is a great CEO and leader and this company has been, ripping. I'm happy. I would be happy to hold if I, you know, was in an IPO or had pre IPO stock.

Would I buy? I don't think so unless I had a conviction that I understood how to trade kind of meme stocks and trade around this enthusiasm and all that, but I don't. So I think I wouldn't be in that buyer bucket right now.

Speaker 2 (35:19)

Okay, so let's say you're buying and you come in today and you gave me the bull bear base case. What would you personally underwrite? What would you hope would happen five years out? What do you think the price is?

Speaker 1 (35:32)

Yeah, think, let's say, yeah, 20, 20, 30. mean, I think I'm pretty squarely in the base, you so more of the base case with Figma where I would expect, yeah, you know, what are they, we said about 40, 40 billion now. Yeah, I mean, I would expect to see it in the 50, maybe slightly above that, you know, in the 55, 60 ranges, because I think I liked,

the core business, think the sort of secular market is expanding, but I don't know that I'm convinced that they're gonna be a sort of AI coding power player. think it's possible that they'll incorporate that and it'll make the product better. But yeah, I think I'm more in that middle range, expecting maybe 50, 60 billion market cap.

Speaker 2 (36:19)

And this is not something we typically talk about because it's not the sort of show we do. But how low do you think this stock will go in the near term if it keeps on depressing? Meaning, do you see any sort of floor? Again, this is not financial advice. We do not do public stock research for a living. This is us just chatting. So take this all with grain of salt.

Speaker 1 (36:39)

Yeah, yeah, yeah. Nothing I say is definitely ever investment advice. think swore wise, I think, you you see a lot of solid SaaS companies growing, you know, maybe in that 15, 20 X multiple range that are roughly comparable to Figma. So, you know, if you take a billion ARR, know, 15, 20 X multiple.

I would guess, I could be wildly off, but I would guess 15 to 20 billion might be kind of a reasonable floor, assuming they continue growing, which I don't think is, wouldn't be a huge deviation from other tech IPOs that we've seen over the last few years where that initial bump sort of gives way after six months, 12 months, that kind of thing. So that's what I would expect to see.

Speaker 2 (37:38)

Awesome, I'm gonna ask one other question and I'll give you my point of view as well, which is, is there a path to this company becoming a trillion dollar company? And what would that path need to look like? And we don't need to give the long version, but just what's your kind of quick version as how this becomes a trillion dollar company, if that's possible.

Speaker 1 (37:52)

Yeah, I think it's always, we're very techno-optimistic at Sacra. I think it's always possible. And I think with Figma in particular, would hinge on, it's a great visual interface for working. It's very sort of fluid. You drag things around. It's very nice to use for designers. think if they made it sort of the...

tool of choice for everyone in the organization trying to ever produce anything sort of visual with images and then layered on, you know, potentially video and other kinds of generative AI fueled content. I think there's an interesting case for them to one day get there potentially, but that also feels like, you know, this feels like the most science fiction element of the presentation so far. So I'm not sure if I actually buy it, but what do you think?

Speaker 2 (38:40)

Yeah, no, I think that's fair. I think Figma is an incredible product. And I think they're running an awesome business in a market that's not absolutely massive. So for now, I think they're limited somewhat by TAM. At its height, Adobe was able to reach $300 billion in the glory days of COVID. And that was

massively overvalued and it's been, you know, well on its way down. This reminds me a little bit of the Facebook IPO. Everybody got excited for Facebook to IPO. Everybody was trading the private shares, really wanted it to IPO and finally IPO'd. I believe it doubled immediately on the IPO or maybe a little bit higher. And then actually the first year of Facebook being public was not so great in terms of stock performance.

And then eventually I think you were able to buy the dip at about half price. So obviously if you bought the IPO of Facebook, you did great because it's gone way up. But if you waited to allow it to settle into its real valuation, you did doubly as great, literally. So I feel like Figma is somewhat the same. I'm not trying to compare it to Facebook directly, but I do think the excitement of Figma being the new darling

and the new IPO and the new meme stock and the momentum with risk on and interest rates going down will wear away. It was shocking how high the price went. I'm personally not so surprised that the price is going down. I wouldn't be surprised if it continues to have volatility because of people wanting to trade the near term. But I also think that as earnings reports come out, there's already going to become much more real as opposed to just hype.

And I wouldn't be surprised if it settles into a 20 something valuation in the billions. And if it goes below 30 billion market cap, I think that's decent entry point. It could just stick in the 30s, but I do think the 40s right now is quite expensive. If it hit teens, I think that would be a problem on execution. It probably won't do that. So I do think that, you know,

Assuming that it's growing 50 % at a time, it hits a billion and a half dollars of revenue in the next six months. know, 20X that. It's a $30 billion market cap, right? That's massively superficial. I do think you can get decent results on this five years out. Probably get towards, let's call it your bullish case of $100 billion. Let's even call it replacing Adobe $150 billion, which I think you'll need a lot of high P.E. to get there.

But I think it's limited by TAM. The thing that can change that all completely is if all of a sudden it layers in much more vibe coding and it becomes much more AI coding forward to try to expand their TAM, which they have such a sticky product with designers up front that I do think designers are going to be willing to try all these new things. So.

Yeah, exactly. I think somebody anonymously wrote here, it dropped 50%. Exactly, exactly. So that was my whole point, that Facebook dropped after the initial push. So my point of view is Figma is an amazing company that's too expensive today. I would want it to pull back. Then again, this is one man's opinion. I'm not a trader. I have no idea how to make money on trading. I'm a buy and hold sort of guy. I try to make money 10 years out.

I'm the sort of person that tries to close his eyes and say, this company going to be amazing a decade from now? And if I can't say yes, I don't buy it. So if all of you on the call are looking to trade and make money in the next month, ignore everything I just said because it's completely irrelevant. And just by the interest rates going down and Bitcoin doing well, it could pull forward risk on companies like this for no good reason whatsoever. Any other thoughts, Jan-Erik?

Speaker 1 (42:40)

I think you said it so well, won't even try to compete with that. I think that's great.

Speaker 2 (42:45)

All right, awesome. Well, that ends this session. I will ask you that if anybody has any feedback on this first concept of actually covering an IPO company, we welcome any feedback in any format. That'd be much appreciated. Thank you all for joining and Jan-Erik, as always, thank you for being amazing.

Speaker 1 (43:04)

Likewise, Slava and see you next time.

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