- Adobe’s $ 20 billion bid for Figma reopens conversations about what’s ahead for software startups.
- Software companies that could be features of larger platforms are targets for the incumbents.
- These are 15 private and public software companies that analysts think could be acquisition targets.
Adobe’s $ 20 billion bid to acquire Figma is the largest ever acquisition of a private software company, according to Bloomberg data, and reopened conversations about what’s ahead for software startups, during a period where IPOs and blockbuster deals have largely paused.
Over the last few years, productivity-and-collaboration tools like Figma, Miro, Airtable, and Notion scored unprecedented funding and high valuations thanks to the shift to remote work and a corporate interest in new software tools.
However, as public-market valuations have fallen, many of these startups are pausing plans to go public with the fear that their valuations will drop. Figma did not face that issue with Adobe’s bid because the purchase price was double Figma’s last private valuation of $ 10 billion.
As companies look to cut spending amid the downturn, many of these startups are facing critical moments where they must prove their worth and necessity to customers. That often involves making the leap from a single product to a full platform of tools.
In this environment, analysts and experts expect consolidation, and for larger players to use this as an opportunity to acquire new tools at a good price.
Buying over building
A person familiar with Wall Street tech deals who requested anonymity told Insider that even struggling companies may look to M&A since it may be more cost-effective to buy a well-run startup rather than waste time and money to experiment internally to build out the product. themselves. The Wall Street deal expert spoke on condition of anonymity because of the sensitivity of the business dealings.
In particular, software companies that make tools that can be included as features in larger platforms will be attractive acquisition targets, several analysts said.
While startups have built businesses around project-management tools, video-collaboration tools, whiteboard tools and others, there is a limit to how much they can grow with a single product offering. So many are expanding to become platforms, and one way they might choose to do that is by joining a larger software company that has already built out an established platform of tools, experts said.
“We’re in a really interesting position for what I call feature companies to be acquired,” Dan Newman, an analyst at Futurum Research, said. “We had a lot of companies that were kind of features that became publicly traded companies, not necessarily super profitable, not necessarily even growing all that fast.”
Other options to build out these platforms internally are limited due to their high cost and the tough funding market, the Wall Street deal expert told Insider.
The types of tools that are desirable
Two areas in software that will likely see more consolidation are productivity-and-collaboration tools and marketing-or-sales tools, Rishi Jaluria, an analyst at RBC, said.
The Wall Street deal expert told Insider that any of the top 10 startups on Forbes’ Cloud 100 list, other than the payments giant Stripe due to its size, are fair game for acquisition targets. Stripe was most recently valued at $ 74 billion. These upstarts all pose serious threats to legacy players, who may take the chance now to knock out competition, the expert said.
While startups are targets, some public companies are also potential acquisition targets if they have reached the peak of their potential to grow on their own, analysts said.
Here are 15 private and public software companies that analysts and experts think are likely acquisition targets.