Figuring out the Figma IPO! (DD on $FIG)

I love IPOs.

The last IPO I thought was amazing was Coreweave, and I posted about it (and how far we've come!). Figma is IPOing on the 31st and it's going to be a big one.

Figuring Figma Out:

What is Figma? Figma is a "cloud-based collaborate design platform". The company boasts of being able to help you "Prompt, code, and design from first idea to final product". Imagine how useful Microsoft Office is to the average white collar worker, and that's what Figma is to the average designer.

(If you need a ELI5 and have the attention span of a 2 year old watching Cocomelon watch this video from their site, it's got bright colors kids crave)

Figma began with Figma Design for UI/UX designers, FigJam for diagramming, then Dev Mode for developers. Figma aims to be the entire suite for product design and runs on a freemium plan.

The FIGnancials:

Figma is going public at a ~$15 billion valuation (and releasing 37 million shares at $25-$28 each). This IPO aims to raise ~$1.1B, listing on the NYSE as $FIG.

Metrics	FY 2022	FY 2023	FY 2024	Q1 2025
Revenue	$324M	$505M (+56%)	$749M (+48%)	$228.2M (+46% YoY)
Gross Profit	$284.5M	$456.2M	$666.4M	$200.1M
Gross Margin	87.80%	90.40%	88.90%	87.70%
Operating Income (Loss)	-$72.4M	$720.1M (w/ $1B Adobe fee)	-$715.8M	$39.5M
Net Income (Loss)	-$85.9M	$738.0M	-$732.1M (incl. ~$800M SBC)	$44.9M
Cash & Cash Equivalents	$283.1M	$471.3M	$463.6M	~$1.5B (post-IPO)
ARR (Annual Recurring Revenue)	N/A	~$650M	~$821M	$912M (run-rate'd)

• From table above: FIG's revenue has been grown (on average), 50% YoY. Gross Margin has been consistent at roughly ~90% (which is in-line with ADBE's as well, the typical pure software company tries for 80%+ gross margin).

• Adjusting for that, Figma has operated near breakeven and holds $1.5B+ in cash, no debt, and owns $100M of Bitcoin through ETFs (lol).

• Figma has also experienced a pretty large loss in 2023, ~$700M which was made up for with the breakup fee from ADBE's attempted acquisition.

Figma's growth strategy comes from its freemium model- individuals can use a free tier, but adding designers and collaborators takes money and organizations need to upgrade to paid per-seat plans, which allows them more flexibility vs just charging everyone the same price the UI/UX designers pay. Figma also has massive market capture- they have 13M MAU (monthly active users) and in their S-1, they state that "95% of Fortune 500 companies use Figma".

As of Q1 2025, 70% of Figma’s revenue comes from the top-tier Organization & Enterprise plans, and has a robust community-built plug-in ecosystem. (Kind of like how Skyrim has 200K mods because people like making crazy things for others to use/enjoy, Figma has 10K plug-ins/widgets). Figma estimates its Total Addressable Market (TAM) at ~$33 billion for design collaboration software, so they clearly can highlight markets to grow in. Their vision is to move from a single design tool to an “operating system” for product development that every stakeholder in a project uses.

Regarding OpEx, Figma historically reinvested heavily in growth (R&D, hiring, global expansion) which kept it near breakeven, excluding one-offs in 2023/2024. This is pretty typical for startups trying to scale and those that are heavily invested in tech.

In 2024, it recorded a net loss of $732.1M, but ~$850M of that was an "extraordinary stock-based compensation" charge related to an RSU liquidity event after the Adobe deal was terminated. Removing that one-time cost, Figma was roughly at breakeven in 2024. In 2023, it showed a $738M profit, due to Adobe paying a $1.0B merger termination fee. Excluding that, 2023 was also around break-even . But by late 2024-2025, Figma’s core business turned profitable: Q1 2025 operating income was ~$40M with a 17% GAAP operating margin, and $45M net income. From an operating leverage standpoint, they have close to $1.5B in cash post-IPO.

The Valuation:

With a $15B valuation and ~821M LTM (last 12 months) revenue, the IPO pricing implies ~20x price to sales. This will likely open at even higher than that, so if you're not allocated shares you have an even higher P/S ratio you're buying at. In comparison, ADBE trades at 10x sales (but FIG has higher growth and retention).

The bull case here is that $FIG successfully penetrates every single major company that requires design work done (all of them that don't make their advertisements in Paint) and becomes the standard for UI/UX work, like how Zoom is the standard for video calls, or Microsoft Office is the standard for every office worker. It already has a 80% market share among designers, and has extreme stickiness. They can acquire users with zero marketing (I've looked at the free tier myself and it's decently robust), and 70% of enterprises deals originate from a single user on a self-serve plan. This means that they don't have miserable sales reps emailing you to try their products, they have in-house adoption. FIG is already profitable, and has $1.5B in cash after the IPO. There's far less liquidity risk, and that means it won't need to dilute. It can also continue investing in R&D, and developing new products.

The bear case for FIG is that they have a ~$16B valuation for ~$1B run-rate revenue and price around 15-20x forward sales. For software in general, that's top of range. Even ADBE trades around 7-10x sales in general (and we've seen the massive bleeds ADBE does when it misses earnings). If Figma ever reports falling revenue or less than 50% growth then it's likely that there'll be a massive selloff and it won't be pretty.

Competitors in the space are Adobe, Canva (which has 100M already and targets small business users), and is valued at $26B privately, Webflow (which competes with Figma Sites). The massive adoption that Figma has had among Fortune 500 companies is a double edged sword- it shows that their product is amazing but also shows they need to monetize more deeply through the companies they've penetrated. AI also serves as both a tool and a threat because of competitors using it and because it lowers the number of people who actually need a Figma membership to participate in the design process, so Figma's growth depends on upselling their products and developing new ones. Essentially, they're cannibalizing their own market due to AI.

Figma has also hinted at changing their pricing model- such as token-based pricing for AI features. These changes can come with MASSIVE backlash (it's one of the reason Cursor kind of screwed themselves out of users) and can easily have users turn to a different product if they no longer love the pricing.

IPO Logistics and how I'm going to trade it

Figma has a dual-class share structure, where the CEO Dylan Field holds super-voting shares worth 15 votes each and a proxy on his co-founder’s shares. This means Field controls >50% of voting power, and thus the company. This isn't so important on the day of IPO, but is important to note going forward into the future. Additionally, a large portion of shares sold in the IPO are from existing shareholders cashing out (~24M/37M are secondary), which can be seen as a slight red flag (insiders taking significant money off the table now).

As mentioned before, Figma is pricing at $25-28 a share. I think it's completely unlikely to price at this range and will likely price at $30+, simply because we're in the hype cycle of the IPO market and Figma is a well known name. Given that Adobe offered $20B for Figma back in 2022, I think it's completely within the realm of possibility that we open higher.

Figma is using an auction-style allocation method. (very important!)

This is relatively uncommon from the normal IPOs you see. This means that institutional investors submit bids on both shares and price and that determines at what price the stock will open, so this means that it's less likely (but not impossible) to experience that "pop" that CRCL had on the day of IPO, and instead will likely just open up and reduce the EV of the trade.

Personally I have put in an order for allocated shares (whether this goes through or not is anyone's guess) , depending on whether I get a suitable amount of shares or not I will buy more at the opening.

Source: Figma S-1, the Figma site, random Youtube videos, my one friend who loves using Figma and helped me design some dumb ideas I had with it, and Elon Musk

TL;DR: "Figma balls"