• Figma's IPO could re-energize the collaborative tech investment landscape.
• The sector benefits from strong digital transformation and remote work trends.
• Companies like Atlassian and Monday.com may see renewed investor interest.
• Compressed valuations present potential opportunities in high-growth SaaS platforms.

The Figma Effect: Is One IPO About to Shake Up Tech Investing?

Every so often, the market serves up a bit of theatre. The failed twenty billion dollar courtship between Adobe and Figma was just that, a proper drama. Adobe, the established giant, tried to buy its most irritatingly successful rival, only to be thwarted by regulators. Now, instead of being quietly absorbed, Figma is heading for the public markets on its own terms. I find this far more interesting. It’s a litmus test, not just for one company, but for an entire category of technology that has become the very plumbing of modern work.

A Rival Unleashed

Let’s be clear about what this means. Adobe, a company that has enjoyed a comfortable reign over the creative software world, now faces a publicly funded, battle-hardened competitor. Figma isn’t just some plucky startup anymore. It’s the platform that design teams, the very people Adobe courts, genuinely seem to prefer. With the proceeds from an IPO, Figma could accelerate its assault, forcing Adobe to innovate rather than simply open its wallet.

To me, this is where the story gets compelling for investors. It’s not about picking a winner in a two-horse race. It’s about recognising that the race itself could energise the entire field. When a dominant player is forced to compete, it often leads to better products and faster growth for everyone involved. The question is whether this renewed competition might lift all boats, or if Figma will simply start sinking Adobe’s fleet.

More Than Just One Company

Figma, for all the attention it gets, is really just the poster child for a much broader shift. Think about companies like Atlassian or Monday.com. Their tools for project management and team coordination have become utterly indispensable. Ten years ago, they were novelties. Today, trying to run a business without them feels like trying to build a house with nothing but a spoon. They are the digital scaffolding upon which modern companies are built.

This isn't a fleeting trend driven by lockdowns. It’s a fundamental change in how we work. The demand for these collaborative platforms is sustained because distributed teams are here to stay. Unlike fickle consumer apps, these enterprise tools have staying power. Once a company gets its teams running on a platform like Jira or Asana, the hassle of switching is immense. This creates a wonderfully predictable, recurring revenue stream, which is music to an investor’s ears. It’s a theme that groups together a number of these businesses, like those found in the The Figma Effect basket, which all tap into this same fundamental shift.

Let's Not Get Carried Away

Of course, one must keep one’s feet on the ground. The tech sector has taken a beating over the last couple of years, and for good reason. Valuations got frothy, and rising interest rates have a nasty habit of making investors less patient with companies that prioritise growth over immediate profit. These collaborative software stocks are not immune. They are sensitive to borrowing costs, and their high valuations can shrink alarmingly quickly when the market mood sours.

Furthermore, competition is fierce. For every Figma, there are a dozen other companies trying to solve the same problem. While the long term picture of digital transformation seems robust, the path is never a straight line. Investing here requires a stomach for volatility and an acceptance that not every player in this crowded field will emerge a winner. There are no guarantees, only possibilities.

Deep Dive

Market & Opportunity

• Figma's upcoming $1.5 billion IPO is a test for investor appetite in the collaborative software market.
• The sector has experienced significant valuation compression, with many companies trading at multiples below historical averages.
• The business model is validated by its evolution from optional tools to critical business infrastructure.
• The subscription revenue model (SaaS) common in the sector creates predictable, recurring cash flows.
• The market is supported by the long-term trend of digital transformation and the permanent shift toward remote and distributed work.

Key Companies

• Adobe Systems Inc. (ADBE): Dominant provider of the Creative Cloud suite. Faces renewed competitive pressure from Figma after a failed $20 billion acquisition attempt, which could drive faster innovation.
• Atlassian Corporation Plc (TEAM): Creator of Jira and Confluence platforms, which are considered indispensable tools for software development teams. Its success is built on cloud-native collaboration tools that scale with modern work.
• Monday.com Ltd (MNDY): Provides the Work OS platform for project management and workflow automation across various industries, demonstrating the sector's reach beyond traditional tech.

Primary Risk Factors

• Revenue growth can slow, and market conditions can shift rapidly.
• High-growth technology stocks are sensitive to interest rate changes, which can cause valuation multiples to compress.
• Competition within the collaborative software sector can intensify.
• Customer concentration is a risk, as losing a large enterprise client can materially impact financial performance.

Growth Catalysts

• A successful Figma IPO could serve as a catalyst for valuation expansion across the entire sector.
• Potential for increased merger and acquisition activity as large technology companies seek growth.
• Platforms benefit from powerful network effects, where the service becomes more valuable as more users join.
• Strong integration capabilities with other business software create high switching costs for customers, protecting market share.
• Opportunity for global expansion as businesses worldwide adopt cloud-based collaboration platforms.