Adobe just announced its intention to buy Figma for $20 billion, which would be one of the largest software acquisitions in history. Even more remarkable is the timing and price paid: $20 billion represents more than 50 times the startup’s annual recurring revenue at a time when public compositions are trading at about one-tenth that level.
Why is Adobe willing to take so much risk to buy Figma? Because it has to. With this acquisition, Adobe recognizes that its persona-based approach to software is the past, and Figma’s job-to-be-done-based (JTBD) approach is the future.
Why by dropping the “er” Figma could build the future?
Adobe’s software suite is built on the paradigm that has been the standard for software design for the past 20 years: focused on the needs of a specific person. Adobe focused on the designer and built a robust set of tools for them; Photoshop, Illustrator, and InDesign are all packed with extensive features to help the designer do his job.
The downside of this narrow focus on designers is that the suite is not easily accessible to non-designers. The learning curve is steep. And, most importantly, the software wasn’t built with collaboration tools. Because Adobe targeted designers, there was no need to build tools for cross-functional collaboration. As a result, “collaborating” in the Adobe suite is much like emailing files back and forth. This friction prevents other user personas from getting involved in the design process. And it’s not a great experience for the designers who work together.
Figma turned this paradigm on its head. Instead of building for designers, Figma built for design. Many people are involved in the task that remains to be done, from product managers to researchers to developers to marketers. By focusing on the JTBD from the start, Figma built a product that welcomed each of these user personas, with easy onboarding and a strong emphasis on collaboration. Figma has built in in-line commentary and multiplayer functionality from the earliest days. As it grew, it added richer collaboration features, such as Figjam, with the aim of ensuring that the entire JTBD of design could be done within the app rather than scattered across countless productivity and collaboration tools.
By dropping the “er” – focused on design rather than designers – Figma has built a tremendously valuable business. More than 65% of users are outside the designer. This cross-functional spread has resulted in a phenomenal net revenue retention of over 150%, one of the very best in software today.
Deep Collaboration: The Future of Business Software
We call the emerging category of products built JTBD-first,”Deep cooperation.” This software combines productivity and collaboration functionality in one place to get a specific, cross-functional job done. Instead of working in one place and then talking about that work in many scattered places, Deep Collaboration creates a single destination to build and collaborate around a specific JTBD. And it allows all the people involved in that JTBD to collaborate effectively, resulting in a better job.
To facilitate this, Deep Collaboration software includes:
- Since JTBD-specific collaboration is embedded alongside the work itself, with Figma, the core JTBD collaboration tooling started with browser-based multiplayer drawing and commenting functionality, later adding audio and other in-line collaboration features
- JTBD specific workflow, as opposed to generic horizontal workflow
- Robust and granular user persona-based permissions and approvals, enabling personas from across the organization to access specific features
- Pricing and packaging models promote the expansion of organizations across organizations, e.g. free viewer levels, lightweight contributors, and power user pricing
The proposed Figma/Adobe deal is not the first major transaction in Deep Collaboration. The $28 billion acquisition of Slack by Salesforce was intended to bring Slack’s collaboration functionality together with Salesforce’s sales productivity tooling. While the integration is still underway, the potential to embed collaboration into Salesforce could change the way the JTBD of sales is done, 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 are leveraging Deep Collaboration principles to drive rapid growth and strong net revenue retention:
very strong builds digital contract management software. The legacy players in this space were focused on building for lawyers. Ironclad focuses on the JTBD of drafting, negotiating and tracking contracts. Almost every user person in a company is involved in this JTBD. By building with robust consent and JTBD-specific workflow, these personas can collaborate more effectively in Ironclad, leading to 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 a very valuable sales enablement tool.
Ironclad’s cross-functional implementation has enabled them to build healthier customer relationships. Customers with more than 6 user personas using Ironclad have 20% higher annual contract value for new businesses and 20% higher net dollar retention than customers with 3 or fewer personas. In other words, the more user personas a customer has on board Ironclad, the more valuable the experience for the customer and therefore for Ironclad.
Procurement has long been in a silo, manual and slow. Traditional procurement processes require three to six teams and different systems, which lack transparency and visibility and waste valuable time.
zip uses the JTBD framework to streamline the procurement process for all employees and all departments. Built for collaboration, Zip gives employees in teams access to a consumer experience to accelerate purchase approvals. According to Zip, CFOs report increased compliance and savings by consolidating procurement tools on one centralized platform.
Product research is another JTBD that has traditionally been siled, full of friction and thus too often neglected. In the absence of effective research tools, companies often skip research and instead waste money building products that their users don’t use, only to find out after launch.
Maze is focused on building the platform for the product research JTBD, allowing all personas involved in this process, from designers to marketers to researchers, to easily get feedback on prototypes and then collaborate on this feedback. As the company continues to roll out collaboration features, the diversification of their user personas has increased to a point where no single persona represents more than a third of the total. Consequently, the retention of net income has increased rapidly.
Unlock market potential by leveraging the JTBD framework
In addition to increasing net revenue retention, dropping the “er” can unlock significantly greater opportunities for the total addressable market (TAM). There are approximately 1 million UX designers in the US, representing the bulk of the addressable market for Adobe’s persona-based approach. There are approximately 8 million people in product management, front-end development and product marketing, all of whom are approachable with Figma’s JTBD approach. For example, instead of targeting the approximately 200,000 in-house legal people in the US, Ironclad may instead target the 4 million people involved in sales, HR, procurement, etc.
The TAM capability is not limited to internal collaboration. By integrating productivity and collaboration in one place, Deep Collaboration companies can also create extensibility for multiple organizations. (Ironclad is now expanding into the inter-organizational contract negotiation platform, eliminating the need for counterparties to email back and forth red lines.)
While the market opportunities for each of these companies are significantly greater than their persona-based counterparts, there are still a number of challenges that Deep Collaboration founders must solve in order to navigate this new paradigm. specifically:
- How to define the scope of the JTBD and determine where to focus the product in the first place?
- How pricing and packaging and whether to offer a free tier or free viewers
- How to build the best sales overlay model and which personas budget to target initially?
We’re excited to partner with the founders building the next generation of software to answer these questions.
Jake Saper is a general partner at Emergence Capital.