The Figma IPO Is Coming -- but Can It Justify Its Valuation?
IPOs have been hot this year, with most of the big ones generating strong returns in just a few months.
Figma makes building design and user interface projects much more collaborative, and it plans to integrate many artificial intelligence tools.
The company is targeting a valuation in the range of $13.6 billion to $16.5 billion fully diluted.
These 10 stocks could mint the next wave of millionaires ›
Investors who have participated in initial public offerings (IPOs) like CoreWeave, Circle Internet Group, and Chime Financial have done quite well this year, which is why it's no surprise to see big hype around another incoming IPO, Figma. Positioned as the Google Sheets of the design and user interface world, Figma allows multiple people to collaborate on design projects, although the company has really morphed into a way for companies to turn ideas into software.
Figma sees immense potential to integrate artificial intelligence into its business and even owns crypto as well. Figma is planning to IPO at a valuation in the range of $13.6 billion to $16.5 billion on a fully diluted basis. But does the company's exciting business justify this large valuation?
A real game changer in design
Brown University alums Dylan Field and Evan Wallace launched Figma in 2012, seeking a way to make the design process more collaborative from a technological perspective. They would eventually create a platform that allowed multiple people to work on design projects through the power of the web but also with high-quality graphics.
Image source: Getty Images.
As technology advanced, the platform did as well, particularly with the release of Dev Mode in 2023, which allowed designers to translate their concepts into code without changing the design file. This ultimately made it easier for designers and coders to work together. Products like this have gained traction, and today, Figma has 13 million unique monthly users, two-thirds of whom aren't designers. Roughly 95% of companies in the Fortune 500 use Figma, so the company is not reliant on a few core customers.
Additionally, Figma sees immense potential to integrate more artificial intelligence (AI) tools into its business. Figma Make already lets users convert a conversational prompt into a working prototype in just minutes. The company believes it stands to benefit from the growth of AI, projecting that there will be 1 billion new apps in the world by 2028, many of which will come to Figma for their branding and user interface.
Do the financials justify the valuation?
The big question with all of these new and exciting IPOs is: Are they too hot out of the gate, or can their growth really justify the valuation? Figma is looking to raise $1 billion and list shares at $25 to $28, giving it a valuation of $13.6 billion at the high end of that range. However, Barron's estimates that the valuation could really be as high as $16.5 billion on a fully diluted basis.
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