Figma

Figma is a design platform for teams who build products together. Born on the Web, Figma helps teams create, share, test, and ship better designs from start to finish. Whether it’s consolidating tools, simplifying workflows, or collaborating across teams and time zones, Figma makes the design process faster, more efficient, and fun while keeping everyone on the same page.

Tags

Founding Date

Oct 1, 2012

Headquarters

San Francisco, California

Total Funding

$ 749M

Stage

series f

Employees

1001-5000

Careers at Figma

Memo

Updated

April 5, 2024

Reading Time

21 min

Thesis

Design is increasingly becoming a driver of business and product strategy in organizations of all kinds. As of 2023, 79% of business leaders actively involved in an app or website design expected better design processes to have a significant benefit to end customers. However, 58% of them reported encountering barriers such as a lack of alignment, siloed teams, and lengthy development cycles during the digital product design process.

The evolution of digital design in the 2010s has been influenced by the advent of mobile devices. Early options for user interface design included Adobe Photoshop, a legacy raster graphics editor. However, this proved to be inefficient because, unlike print graphics, digital graphics need to be displayed on screens of varying sizes. While the advent of software like Sketch marked a new era of design tool innovation in 2010, designers in this period still had to use an array of tools to handle individual parts to create a UI flow, such as prototyping, version control, and developer handoff. Since they were desktop-based, these tools were not conducive to collaboration.

Figma is a cloud-based design tool that offers collaborative features, facilitating real-time work on user interface designs. It provides a variety of tools for creating UI flows, wireframes, and interactive prototypes, with support for vector graphics and responsive design principles. Figma's cross-platform compatibility makes it accessible across different operating systems, including Windows, macOS, and Linux. As of March 2024, Figma’s customers include notable companies like Airbnb, Square, and Netflix.

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Founding Story

Figma was founded in 2012 by Dylan Field (CEO) and Evan Wallace. The two met at Brown University, where Field was studying computer science and Wallace was his friend and TA. Field interned at LinkedIn in 2010 and Flipboard in 2011 and 2012, working on data analysis, product design, and software engineering projects. He also led Brown’s Computer Science Department Undergraduate Group. Wallace had prior engineering experience at Pixar and Microsoft.

Field applied for and received the Thiel Fellowship in 2012. Despite a lack of mechanical engineering background, the original idea with which he applied was for a drone company. Field stated in his application that:

“The prospect of using UAVs in civilian settings faces three limiting factors: software, battery life and the FAA…I am going to change the world by creating better software for UAVs. After I finish at Flipboard, I will cofound a company with the smartest programmer I know and work on this problem.”

In 2011, a JavaScript API called WebQL was launched, which made it possible to render high-performance 2D and 3D graphics in a web browser. Wallace, who had previously worked on building and programming drones, convinced Field to move away from the plan and work on WebQL-related products instead. According to Field, the primary reasons that Wallace used to convince him to move away from drones included the fact hardware involved long debug cycles, that drones were a space with regulatory risk, and that many drone product ideas implied potential violations of privacy.

The duo therefore pivoted to the idea of having real-time graphics in a browser, which was inspired by a 3-D demo of a ball floating in water that Wallace had built previously. Field and Wallace extended the idea and experimented with building a “Photoshop in the browser”, incorporating tools such as poisson blending, image cutting, and a photo editor into a consumer application. In this initial period, the team received a negative response from an investor in a potential seed round who passed due to a perceived lack of focus, telling them “I just don’t think you know what you’re doing yet.”

In response, the team decided to focus on interface design, removing other features such as animation, photo editing, and 3-D design from the product scope. They coalesced around a new vision which remains Figma’s focus: “to make design accessible to all”. Since graphic processing capability had become possible on the web, Figma chose to build its product as a web-based model. In 2013, Field and Wallace raised a $3.9 million seed round led by Index Ventures. They used this round to grow the team to 18 employees, at which point they raised a $14 million Series A led by Greylock Partners. Figma launched a closed beta product in 2015 after this Series A, and then publicly released its flagship design editor product in 2016.

To attract users, Figma initially focused on individual designers, trying to get them on board for side projects even before they incorporated the software into their daily work. The product was initially free, only adding a paid tier two years after its launch. As Claire Butler, Figma’s first marketing hire, put it:

“If folks weren’t ready to use Figma full-time in their day job, they could use Figma for free for a side project. You could use the tool in a lower-stakes way and come back to Figma repeatedly over time.”

Figma then held customer discovery chats, gathered feedback, and demoed with potential customers. The first milestone was when the company signed on Coda as a customer.

Product

Figma Design

Figma’s core product is a design editor that allows users to create, prototype, and iterate on designs in real time within a web browser, unlike traditional design software which works offline and does not allow real-time and multiuser collaboration. Figma provides solutions for multiple product development tasks such as design, prototyping, developer mode, and design systems.

Source: Figma

Design: Figma supports creating high-fidelity mockups. Its design tool includes pre-loaded frames, which allows users to begin designing by adding a frame, marking a part of the canvas. These frames can then contain other frames and sections, allowing users to create complex designs while retaining coherence. Figma’s design tool also offers intelligent alignment of components through auto-layout.

Like branching in code development tools, Figma also offers the ability to branch from a main design and add updates to the main design through merging. Like its other design tool competitors, Figma also offers a vector drawing tool. Users can switch between different views, such as desktop, tablet, and mobile, to ensure that their designs are responsive and optimized for various screen sizes. Figma also allows users to “Spotlight” themselves, allowing other collaborators on the file to follow each movement they make on a canvas, including things like zooming in or switching pages.

Prototyping: Users can create multiple user flows by adding connections between any two frames. They can define the trigger, such as hover, scroll, click, or double-click, at which the interaction flow is supposed to start and move to the next screen. No-code prototyping allows users to visualize interactive flows by letting them preview and play prototypes. Users can also add advanced prototyping features like conditional logic, smart animation, and dynamic layers.

Source: Figma

Design Systems: To maintain and support design consistency in teams, users can publish design assets in team libraries so that any team member can create standardized projects. Figma supports adding design tokens called variables, which allow users to more easily design for different product themes and screen sizes. Components are elements of a design, such as buttons and icons, which can be reused and customized as variants. Figma also offers design system analytics tools to check the frequency of components and variants usage.

Source: Figma

FigJam

Source: Figma

FigJam is an online collaborative whiteboarding platform designed to enhance remote collaboration and ideation processes within teams. Launched in 2021, FigJam offers a virtual workspace where teams can visualize ideas, discuss strategies, and create diagrams in real time. The product caters to designers, developers, project managers, educators, and professionals across various sectors. Users also get features like audio calls, comments, voiceovers for async communication, and workflow widgets. FigJam allows users to react with stickers, emotes, and stamps. Like Figma Design, FigJam allows users to ‘Spotlight’ themselves, allowing other collaborators on the file to follow them.

In 2023, FigJam AI launched in open beta. The AI feature helps users summarize, sort, and generate templates for flowcharts, icebreakers, meetings, and brainstorming sessions, based on written prompts. Templates offered include project kickoff, team meetings, flowchart, customer journey map, standup, retrospective, roadmap review, and project timeline. FigJam is directly accessible via browser and through the Figma Design app on desktop and mobile phones. For iPads, FigJam can be accessed through the Figma Design or as a standalone application.

Dev Mode

In 2023, Figma launched Dev Mode, a new interface to help developers take design from handoff to implementation as quickly as possible. Dev Mode is an option within a Figma file that allows developers to inspect the specs and styles without the scope of impacting the design file. Designers can generate code snippets, assets, and specifications directly from their designs, which allows for streamlining the handoff process from design to development. A VSCode extension allows developers to inspect Figma files, receive notifications, and use the integrated text editor. Other developer-focused tools include a component playground to test properties in a sandbox, section status tags to see which screens are ready for hand-off, and version comparing to see design changes made in a frame.

Figma can also be integrated with Jira, GitHub, and Storybook to streamline the development and design team’s workflow. Figma Design is accessible across various platforms such as its web app and desktop. Users can only view boards and comments through the Figma mobile app.

Market

Customer

Before products that offered collaborative design software on a browser came onto the market, designers would need to use multiple tools from ideation to creation to handoff. This created inefficient feedback loops because designers would often be siloed from a constantly iterative process.

When Figma was gearing up for its beta launch in 2015, it started tapping into the community of designers to demo the product. Field, along with his first business hire, conducted informal interviews with designers, and the product was iterated upon with the goal of keeping “the individual designer in mind”.

The company followed a bottom-up SaaS go-to-market approach. By offering a free version first, designers could use it for a side project in a lower-stakes environment and eventually become repeat customers and advocate for its use in their day jobs, leading to business adoption. Along with product designers, initial target customers also included typographers, illustrators, and iconographers.

When the company initially introduced a paid tier, it limited the number of people who could collaborate in the free tier. The company soon realized, however, that “we weren’t enabling people to experience the magic moment of multiplayer collaboration” and so adjusted their strategy by allowing free members to collaborate with an unlimited number of people, while limiting the number of files allowed. This supported its bottom-up strategy of targeting individual users to become eventual advocates for business customers.

Figma reported having almost 4 million users in September 2022. In March 2022, Figma noted almost 80% of its weekly active users were outside the United States, and this had climbed to 89% as of April 2024 according to Similarweb data on traffic to Figma’s website. Figma users are overwhelmingly young (65% under the age of 35). As of April 2024, notable business customers of Figma included Microsoft, Stripe, Netflix, Spotify, Patagonia, Puma, The New York Times, Headspace, Adyen, Mixpanel, Carta, Datadog, Square, Gusto, Stitch Fix, Coinbase, Zoom, Asana, Github, Microsoft, One Medical, and Dropbox.

Source: Figma

Market Size

Figma’s design platform operates in the global UI and UX design software market, which was valued at $1.1 billion in 2022, and is expected to reach a market value of $4 billion by 2028. In 2023, 76% of designers reported using collaborative design tools more often, likely as a result of the broader trends toward hybrid or remote work, with 75%of designers working remotely more often as of 2023.

FigJam, meanwhile, operates in the broader category of collaborative design tools or online whiteboarding platforms. Productivity management software was valued at $54.6 billion in 2023 and was expected to reach $150.6 billion by 2032, growing at a CAGR of 13.5%. The collaborative whiteboard software market in particular was projected to reach $2.6 billion in 2024 and to grow at a CAGR of 20.8% between 2024-2029.

Competition

Canva

Canva is a collaborative graphic design platform launched in 2012. The company offers simplified design tools to create designs including social media content, videos, gifs, posters, websites, and multimedia presentations. Canva is designed to be the “visual suite for everyone,” requiring little to no experience in design to use. It offers thousands of templates and resources to teach individuals who have never designed anything how to create high-quality graphics. Figma is geared toward professional designers who need advanced collaboration tools, whereas Canva targets non-designers who need to design simple graphics.

As of April 2024, Canva has raised $572.6 million in total funding. In September 2021, Canva raised $200 million at a $40 billion valuation led by T. Rowe Price and has received funding from investors Sequoia Capital, Bessemer Venture Partners, General Catalyst, Shasta Ventures, 500 Global, and Founders Fund. In April 2022, in response to a fall in public company valuations, Franklin Templeton cut the carrying value of its shares in Canva by one-third, reducing Canva’s valuation to approximately $37 billion.

Sketch

Sketch was founded in 2010. It is a vector graphics application that designers use to create UI and UX flows for mobile applications and websites. It raised a $20 million Series A in September 2021 at an undisclosed valuation led by Benchmark, which accounted for its total funding to date. The company had a partnership with Apple that Sketch ended in 2015, removing the Sketch app from the App Store and allowing users to download it directly. The Sketch app was made available on the App Store again in 2023. As of 2024, Sketch has more than 1 million users, with notable clients including Netflix, Google, Boeing, Target, Epic Games, Motorola, and Porsche.

Both Sketch and Figma offer similar functionalities for creating digital interfaces. Unlike Figma, which operates on a cloud-based collaborative platform, Sketch is primarily a desktop-native application. Sketch users need an Apple computer running MacOS to create and design files in the Sketch application, with the web app only offering view, inspect, and download features.

AdobeXD

AdobeXD, which has now been discontinued by Adobe, was a design and prototyping tool developed by Adobe Systems initially released in 2016. AdobeXD was deeply integrated with other Adobe Creative Cloud applications such as Photoshop and Illustrator, offering workflow integration for designers already entrenched in the Adobe ecosystem. As part of other products offered by Adobe bundled in a Creative Cloud suite, Adobe XD does not offer a free tier.

The software generated $17 million in ARR in 2022, however, AdobeXD was no longer available as a standalone application through Adobe’s Creative Cloud app launcher as of June 2023. Given that Figma and AdobeXD offer similar design tools to customers, this indicated that after being acquired by Adobe, Figma would replace AdobeXD. After Adobe’s deal to acquire Figma for $20 billion collapsed in December 2023 under regulatory pressure, Adobe announced plans to discontinue XD.

Framer

Framer is a design tool that provides a visual interface for designing UI components and screens, as well as a code editor for adding logic and interactivity using JavaScript. In 2022, Framer evolved from being a prototyping platform to a no-code web design platform, allowing it to expand its customer base to marketers and non-technical users. Unlike Framer, Figma does not yet offer no-code publishing tools as of April 2024.

Framer was founded in 2013 and raised a $27 million Series C in September 2023 at an undisclosed valuation, led by Meritech Capital Partners. As of April 2024, the company has raised a total of $61 million. The company reported revenues of more than $10 million in September 2023. As of April 2024, Framer customers included Dribbble, Superhuman, Zapier, and Contra.

Miro

Miro is a collaborative whiteboarding platform that was founded in 2011. Miro offers a virtual space for brainstorming, ideation, and visual collaboration to users across industries like engineering, marketing, and IT. Miro is a direct competitor for FigJam, with both products offering similar whiteboarding features. Miro offers greater integrations with other productivity tools like JIRA, Slack, and Zoom compared to FigJam. FigJam offers integration with Figma’s design tool, that lets users transition between ideation and design.

The company raised a $400 million Series C in January 2022 at a valuation of $17.5 billion led by ICONIQ. As of April 2024, the company has raised a total of $476.3 million. The company has more than 60 million users in 200K organizations as of April 2024. Notable customers include Nike, Accenture, IKEA, and Deloitte.

Business Model

Figma employs a subscription-based business model with both free and paid tiers for both its Figma and FigJam products. Users can choose from three kinds of “seats” for both products: viewer, viewer-restricted, and full. Both products charge only for full users, viewers and viewer-restricted are free.

A viewer can view design files, create and edit files in drafts, and join open teams. By taking actions like requesting admin for edit access and creating libraries to share with a team, a viewer can upgrade themselves to a full seat. A viewer-restricted has the same features available as a viewer, but they cannot take action autonomously to upgrade themselves to a full seat. A full-seat user will be able to access all the features in the tier they belong to.

Figma

Source: Figma

The free tier in Figma offers basic design and collaboration features, with limitations on the number of design files and team members that can be added to the account. Figma's paid plans cater to individual users and teams, with varying pricing tiers based on the scale of usage.

Figma Professional is geared towards individual users and is priced at $12 per editor per month, offering advanced features such as unlimited projects and version history. For teams, Figma offers Organization or Enterprise tiers. Figma’s Organization plan starts at $45 per month and includes additional features like design system analytics and creating organization-wide libraries. For $75 per month, Figma offers its Enterprise plan, which adds workspace control in larger teams and allows for another layer of structure.

FigJam

The free tier on Figma includes access to a free FigJam plan, with a limitation on the number of files. FigJam has three paid subscription levels, with a professional plan for $3 per month which offers an uncapped number of files and sharing permissions. The Organization and Enterprise FigJam plans are billed at $5 per month, which includes additional content management, access to private plugins, and plugin administration.

Plugins

In 2019, Figma Community was launched as an open-source platform for designers to publish and share files in the public domain. Users can publish and use assets like widgets, templates, and plugins. Customers who publish these assets can offer them for free or as a paid resource, where Figma takes 15% of sales.

Traction

Following product-led growth principles, scoping out pricing tiers with potential customers, and product evangelism led to Figma’s market share increasing from 17% in 2017 to 77% by 2021. In 2023, Figma reached $600 million in revenue and recorded a 50% growth rate YoY. In November 2023, the company reported adding 500 employees in one year following its $20 billion acquisition by Adobe was announced in September 2022, only to be abandoned in December 2023. As of December 2023, the company had almost 1.3K employees globally.

In 2023, Figma was the primary choice of software for UI design for 75% of product designers. Almost 40% of designers used FigJam as the primary choice of software for digital whiteboarding. According to a 2023 survey of designers around the world, Figma’s tools have been among the most popular across categories including UI design, prototyping, digital whiteboarding, and design systems. Figma customers as of April 2024 include notable companies like Stripe, Adyen, Uber, Gojek, Gusto, Deliveroo, Netflix, and Notion.

Valuation

In September 2022, Adobe announced plans to acquire Figma for $20 billion. Almost 15 months later, in December 2023, the deal was called off after pushback from European regulators. Britain’s Competition and Market Authority declared that the acquisition typified anti-competitive behavior and that with the acquisition Adobe would “eliminate competition for product design, image editing and illustration software”. When the deal was called off, Figma received a $1 billion breakup fee from Adobe.

Prior to this deal, Figma raised a $200 million Series E in June 2021, at a valuation of $10 billion. This round included investors like Durable Capital Partners and Morgan Stanley. The company returned to the $10 billion internal valuation in January 2024, after the Adobe acquisition deal was canceled.

Since 2020, Figma’s valuation has increased rapidly. It raised a $50 million Series D in April 2020, at a valuation of $2 billion, which was five times lesser than its valuation in 2021. As of April 2024, Figma has raised $333.4 million in total funding. Notable investors in Figma include Andreessen Horowitz, Sequoia Capital, Kleiner Perkins, Greylock, and Index Ventures. Figma’s internal valuation was reportedly at $10 billion as of January 2024 (half of the price Adobe would have paid for its acquisition before it was called off).

Key Opportunities

AI Integration

In June 2023, Figma announced the acquisition of Diagram, a five-member team that created AI tools that could be used as plugins on Figma. In November 2023, a public beta version of FigJam AI was launched. Figma’s AI-powered features allow users to summarize meeting data, generate customized templates through generative AI, and solve the “blank canvas problem”. Figma is focusing on integrating AI across its tools, for example with its launch of a ChatGPT-powered plug-in on FigJam called Jambot in August 2023. The company is also investing in expanding its machine learning platform team and developer productivity team. Figma is approaching AI integration as a way to involve non-designers in the collaborative product-building process.

Increased Collaboration

Prior to tools like Figma, interface design for software development was done using products like Sketch, with a non-collaborative, non-web-based approach. This siloed the designers, making the design process file-based, which created the conditions that helped give rise to Figma.

In 2021, Figma acquired Visly, which built a tool for developing UI components in React. Figma wanted to optimize the handoff process and add features aimed at developers. In January 2024, the company launched the Dev Mode toolset out of beta, which allows developers in Figma files to inspect designs, compare changes, and work in VS Code from within the design file.

In summary, Figma started in design collaboration for design decisions. It then moved to whiteboard collaboration for product decisions and followed this by launching Dev Mode to help take an idea from design to code. This implies that Figma wants to basically own the workflow from ideation (FigJam) to design prototyping (Figma) to development (Dev Mode). Figma has an opportunity to become a product suite that effectively takes an idea and helps it become a reality.

Strategic Global Expansion

As of April 2024, 89% of Figma users were located outside the US. In September 2023, the company announced plans to double its office space and headcount in its EMEA hub headquarters in London to more than 250 people It also launched an Asia-Pacific hub in Singapore in May 2023, where it serves customers like Grab, GoTo, and the Sea Group. as it continues to expand its international presence, it may be able to more effectively leverage its international userbase of individual users to upsell to businesses in those geographies.

Key Risks

Pricing Model

Figma’s Dev Mode pricing has been difficult for smaller companies to justify, given that the tool still offers very basic features to a developer. While Figma offers developer-oriented functionalities to make the interface hand-offs more efficient, it is still a design-centric tool. With the introduction of Dev Mode and other developer-oriented tools, Figma may be trying to move focus from designers to developers. Amongst community discussion boards, users have complained about the Dev Mode licensing rules.

To counteract this, the company could look into creating differently priced tiers for developers or offering Dev Mode as a plugin. With Dev Mode and FigJam, Figma is becoming a multi-product platform, which complicates billing flows substantially. It needs to figure out how it wants to market and sell its evolving product suite.

Regulatory Roadblocks

Regulatory pressure makes it difficult to consolidate software products and companies with different functionalities to build an end-to-end product. The pushback can cause a decline in venture investment into design and prototyping software, and slow down innovation in existing products. This was demonstrated, for example, by Adobe first suspending and then permanently sunsetting its in-house Figma competitor, AdobeXD, after the acquisition deal was announced.

Regulation against acquisitions by touting anti-competitive behavior also discourages community interaction and disincentivizes platform-agnostic innovation. Without the support of a tech giant with a $3 billion R&D budget, Figma will need to finance its own research and innovation to counter other AI-based solutions.

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Summary

Figma's cloud-based platform is intended to enable real-time collaboration, offering a comprehensive suite of tools from design to development. Founded by Dylan Field and Evan Wallace, Figma began by targeting individual designers and gradually expanding into enterprise adoption. As of 2024, it had over 4 million users, and 75% of product designers in 2023 saw Figma as the primary choice of software for UI design according to one survey.

Adobe's attempted acquisition at a $20 billion valuation in September 2022 was thwarted by European regulators in December 2023. Figma readjusted its valuation to $10 billion in January 2024. It has leveraged artificial intelligence starting with its FigJam product and continued to expand its customer base by introducing Dev Mode, expanding its user base beyond designers.

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Authors

Shmi Bhan

Fellow

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