What the Adobe-Figma deal says about the future of deep collaboration
Adobe just announced plans to buy Figma for $20 billion, which would be one of the largest software acquisitions in history. Even more remarkable is the timing and the price paid: $20 billion is more than 50 times the startup’s annual recurring revenue at a time when public comps are trading at around a tenth of that level.
Why is Adobe willing to risk so much to buy Figma? Because it has to. With this acquisition, Adobe recognizes that its personality-based approach to software is a thing of the past and Figma’s job-to-do (JTBD) approach is the future.
Why dropping the “er” allowed Figma to build the future
Adobe’s software suite was built using the paradigm that has been the standard for software design for the past 20 years: focusing on the needs of a specific person. Adobe targeted the designer and created a robust set of tools for them; Photoshop, Illustrator, and InDesign all come with extensive features to help the designer do their job.
The flip side of this narrow focus on designers is that the suite isn’t easily accessible to non-designers. The learning curve is steep. And, critically, the software was not built with collaboration tools. Because Adobe focused on designers, there was no need to create tools for cross-functional collaboration. As a result, “collaboration” in the Adobe suite largely resembles sending files via email. This friction deters other users from getting involved in the design process. And it’s not a great experience for designers collaborating with each other.
Figma has reversed this paradigm. Instead of building for designers, Figma built for design. Many people are involved in the work to be done with the design, from product managers and researchers to developers and marketers. By focusing on the JTBD from the start, Figma built a product that accommodated each of these users, with easy integration and a strong focus on collaboration. Figma incorporated online commentary and multiplayer functionality from day one. As it grew, it added richer collaboration features like Figjam in an effort to ensure that the full JTBD of the design could be done within the application instead of being scattered across a myriad of productivity and collaboration tools.
By ditching the “er” – focusing on design rather than designers – Figma has built an extremely valuable business. Over 65% of its users are outside of the design function. This cross-functional split has led to phenomenal net revenue retention of over 150%, among today’s best software.
Deep Collaboration: The Future of Enterprise Software
We call the emerging category of products built in the first place by JTBD, “Deep Collaboration”. This software combines productivity and collaboration features in one place to get specific, cross-functional work done. Instead of working in one place and then talking about it in many scattered places, Deep Collaboration creates a single destination in which to build and collaborate around a specific JTBD. And it allows everyone involved in that JTBD to collaborate effectively, which results in a better job done.
To facilitate this, the Deep Collaboration software includes:
- Since JTBD-specific collaboration is integrated alongside the work itself, with Figma, JTBD’s core collaboration tool started with browser-based multiplayer drawing and commenting functionality, later adding more audio and other online collaboration features.
- JTBD-specific workflow, unlike the generic horizontal workflow
- Robust, granular permissions and approvals based on user personality, allowing people across the organization to access specific features
- Pricing and packaging models promote cross-organizational expansion, e.g. free viewing tiers, light collaborators, and pricing for power users
The proposed Figma/Adobe deal isn’t Deep Collaboration’s first major deal. Salesforce’s $28 billion acquisition of Slack aimed to combine Slack’s collaboration functionality with Salesforce’s sales productivity tools. Although the integration is still in progress, the potential for integrating collaboration within Salesforce could change the way sales JTBD is performed, enabling better internal collaboration for sales teams and better external collaboration with prospects. We wrote about the Deep Collaboration implications of this acquisition here.
A number of early-stage startups rely on the principles of Deep Collaboration to generate rapid growth and strong retention of net revenue:
Ironclad builds digital contract management software. The actors inherited from this space focused on construction for lawyers. Ironclad focuses on the JTBD of contract drafting, negotiation and monitoring. Almost all users in a company are involved in this JTBD. By building with robust permissions and a JTBD-specific workflow, these people can collaborate more efficiently in Ironclad, resulting in faster contract cycles, lower overhead, and better alignment.
Indeed, some of Ironclad’s most active users are salespeople. By simplifying and speeding up the contracting process, Ironclad has become an invaluable sales enablement tool.
The cross-functional deployment of Ironclad has allowed them to build healthier customer relationships. Customers who have more than 6 user personas using Ironclad have a 20% higher annual contract value and 20% higher net dollar retention than those with 3 personas or less. In other words, the more users there are as customers on board Ironclad, the more valuable the experience is for the customer and, therefore, for Ironclad.
Procurement has long been siloed, manual and slow. Traditional procurement processes require three to six teams and disparate systems, which lack transparency and visibility and waste valuable time.
Zip uses the JTBD framework to streamline the procurement process for all employees and departments. Built for collaboration, Zip empowers employees across teams with a consumer-like experience to speed up purchase approvals. According to Zip, CFOs are reporting more compliance and savings by consolidating procurement tools on a centralized platform.
Product research is another traditionally siloed JTBD, full of friction and therefore too often overlooked. Without effective research tools, companies often ignore research and waste money building products that their users don’t use, only finding out after launch.
Maze is focused on building the JTBD product research platform, allowing everyone involved in this process, from designers to marketers to researchers, to easily get feedback on prototypes, and then to collaborate on these comments. As the company continues to roll out collaborative features, the diversity of its personas has grown to the point that no single persona accounts for more than a third of the total. As a result, net revenue retention has increased rapidly.
Unleash market potential by leveraging the JTBD framework
In addition to increasing net revenue retention, removing the “er” can unlock much larger total addressable market (TAM) opportunities. There are approximately 1 million UX designers in the United States, which is the bulk of the addressable market for Adobe’s personality-based approach. There are approximately 8 million people in product management, front-end development, and product marketing, all of whom are addressable with Figma’s JTBD approach. Instead of targeting the roughly 200,000 in-house lawyers in the US, for example, Ironclad can instead target the 4 million people involved in sales, HR, purchasing, and more.
The TAM opportunity is not limited to internal collaboration. By integrating productivity and collaboration in one place, Deep Collaboration companies can also create cross-organizational expansion opportunities. (Ironclad is now expanding to become the cross-organization contract negotiation platform, eliminating the need for counterparties to email red lines back and forth.)
Although the market opportunities for each of these companies are significantly higher than their personality-based counterparts, there are still a number of challenges that Deep Collaboration founders must overcome to navigate this new paradigm. Specifically:
- How to define the scope of the JTBD and identify where to focus the product initially
- How to set the price and package and whether to offer a free tier or free viewers
- How to Build the Best Sales Overlay Model and Which Persona Budget to Target Initially
We’re excited to work with the founders of the next generation of software to help answer these questions.
Jake Saper is a general partner at Emergence Capital.