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Comment by happymellon | Hacker News Reader

There was no upside to this.

Much like Microsoft's acquisition of Activision Blizzard, Oktas acquiring Auth0, it is just market consolidation.

If I was to try to steel man an argument for why acquisitions like this are good it would be that a lot of startups like Figma only exist because acquisitions are common and therefore offers early investors an exit on their investment that isn't 1-2 decades in the future.

If we got rid of M&A in tech there would significantly less investment and much less innovation, which I think you could argue is bad for the ecosystem as a whole and the end consumer of these products – even if individual acquisitions are often not great when viewed independently.

Or to look at it another way, big tech basically outsources their R&D to startups and the successful projects (companies) are then acquired. And this goes both ways given the goal of a lot startups is to be acquired.

The problem isn't that they are acquired, the problem is that they are acquired by their primary competitor, leading to a quasi-monopoly.

If Figma was being acquired by literally any other company the regulators wouldn't have any problems with it.

Investors don’t have to structure their deals such that selling the company or an IPO is the only way to get their money out though. They could say give me 10% of profit until I get 10x my investment, etc. At least that way investors are aligned with creating a company with sustainable profits, rather than the VC pump and dump that we’re all familiar with.

As in, maybe investors should hold stocks for the dividends they pay?

Nobody pays dividends anymore it’s all about share buybacks

Alternate argument. Maybe these kinds of investments are bad and we would have more realistic companies if founders and investors focused on profitable companies and making sure their customers were actually happy rather than trying to look appealing to some behemoth that will buy them down the line or other investors.

> if founders and investors focused on profitable companies and making sure their customers were actually happy rather than trying to look appealing to some behemoth that will buy them down the line or other investors.

This right here. What happened to IPOs being the endgame?

Higher interest rates -> less money to invest into IPOs, I suppose. A number of zirp-times IPOs were... less than stellar investments.

The shift away from IPOs was long in the making though. It's nowhere as recent as the interest rate shift.

What was the reason?

I'm guessing ZIRP-enabled acquisitions, made for an easier route to succeed rather than an IPO and being judged by the market on the go.

The worst part is, these companies outcompete and end up destroying "realistic companies" because they don't have to live hand-to-mouth.

> we would have more realistic companies

I assume by "realistic" you mean companies that prioritise profitably?

I don't hold a strong opinion on this, but the way I see this is that, yes, investors could invest in companies and demand those companies maximise profits so they can see a return on their investment as soon as possible without the need for accusation, but I genuinely don't know if most users would agree this is better for them.

To appeal to an acquirer or other investors companies most first appeal to their users and show strong user growth. So I don't buy your second point that companies prioritising profitably are somehow more focused on building a good products for their users – and if anything I'd probably argue the inverse is generally true.

I suppose if you were to push me for an opinion on this I think it's fine to let the market decide what's best. Companies can already focus on profits if they wish. And if you're right that companies that do this will have better products and keep their users happy then companies that choose to do this should take market share from big tech over time.

But to be so certain of this that you'd use regulation to enforce it thereby destroying a significant source of funding from early stage companies and the innovation those companies provide the tech sector would be a risk. Especially when I'm not even sure you're right that consumers prefer companies that focus on profitability.

> To appeal to an acquirer or other investors companies most first appeal to their users and show strong user growth. So I don't buy your second point that companies prioritising profitably are somehow more focused on building a good products for their users – and if anything I'd probably argue the inverse is generally true.

It’s hard to compete with free. You can’t burn millions you don’t have to present a sweet deal to users or releasing features in month. And now people have become accustomed to receive everything on the internet for free (bundled with ads).

> profitable companies and making sure their customers were actually happy

These two are negatively correlated. Google and reddit and other companies were awesome and very user friendly when they had investors pouring in money and they could afford loss.

All the VC hate in HN is weird given we are in a platform owned by VC.

Google not being awesome has nothing to do with VC. They could be wildly profitable while continuing to innovate on product and providing excellent customer support. Instead they're wildly profitable while their dysfunctional organization is sending their product quality to shit.

Alternatively, blocking anticompetitive mergers will make VCs less likely to fund loss-making companies for decades, thereby creating space for healthier competition at a much earlier stage.

How many competitors died on the vine because Figma was able to offer a free tier subsidised with low interest rate VC money?

> How many competitors died on the vine because Figma was able to offer a free tier subsidised with low interest rate VC money?

Is it any different from wealthy established multinationals offering a free tier subsidized by steady profits from established (sometimes even monopolistic) product lines killing all startup offerings?

It’s probably the same, but I’m not necessarily talking about outlawing the practice itself, just the acquisition that makes the practice (eventually) profitable for investors. Large companies with monopolistic product lines shouldn’t be able to merge either.

There are other big tech companies that could acquire Figma without decreasing competition. I could see Microsoft buying it for example. They don't have a play in the graphic design space, and could potentially benefit from the acquisition

The idea that higher valuations drive more innovation is probably not meaningful at the scale we are today.

Would the founders work as hard as they did, if instead of making $5bn, they made $2bn? Probably just as hard.

Yes, price signals work, but not linearly at these scales.

This is a good argument, but it would drive their valuations even higher if there were two competitors leading to a bidding war , instead of just one Adobe

Figma has a business model, no? They can stay self sustaining from their paid service?

> a lot of startups like Figma only exist because acquisitions are common and therefore offers early investors an exit on their investment that isn't 1-2 decades in the future.

> If we got rid of M&A in tech there would significantly less investment and much less innovation

It appears this way because of the path we took with our economy, but that doesn’t mean that an alternate path isn’t viable. The giants didn’t get big through innovation. They all created some initial innovation that allowed them to print money, which then allowed them to gobble up any other company that could either be of use or compete against them. If they weren’t able to acquire, that money wouldn’t disappear from the economy. It could be sent back to shareholders in the form of dividends, who would find other investments for it. Perhaps the market would find the best use for that money instead of having it controlled by a few giant entities. I tend to think that’s how the stock market was supposed to work.

Don’t think Microsoft the dominant creator of games compared to Adobe which is the dominant creator of graphics tools.

Microsoft is trying to buy more than just Activision/Blizzard I the games industry.

Their goal (in my opinion) is to have enough studios to be cranking out one or more games each month for game pass.

With many games taking over 3 years now to make and about 10 of those Activision studios working on just Call of Duty, they have several more studios to go.

In my opinion, they're just playing catch up with Sony. Sony started buying up studios years ago and has some quality studios pumping out top notch games which are Playstation Exclusive. To deal with that Microsoft is buying up some too, they just went straight to the top and decided to go for an already estabished studios instead of going for smaller ones and investing until they deliver in 5-10 years.

What people hated about Microsoft’s acquisition was that it will deprive its competitors IPs they used to have access to - eventually.

Sony’s acquisitions are less “egregious” as the companies they acquire usually generated few to no (valuable) IPs for their competitors - there are exceptions of course. That’s why most all of their acquisitions fly under the radar.

Yea, but the problem was originally caused by Sony. Many say it's anti-competive but really it's basically done to compete. I would say making games console exclusive should be banned if you want to remove things like this.

Microsoft has massive conflict of interest. Just because they don't dominate making the games yet, doesn't mean that this wasn't a bad thing.

At least with Activiaion Blizzard under new management, there's a hope of reviving the Starcraft franchise?

But otherwise yes, Okats & Auth0, Figma + Adobe 100% travesty. As would have been nvdia + arm.

About Starcraft: I hope so

If it happens, I'm skeptical it will lead anywhere good. I don't want Starcraft with season passes and loot boxes.

If you aren’t allowed to sell something, you don’t really own it. Whoever decides the valid sale conditions also owns part of it, it’s just off the books (so to speak).

Do we really want governments implicitly part-owning companies that aren’t related to violence? At least a monopoly can be out innovated.

With the sale price passed directly on to consumers in the inevitable form of higher subscription fees.

Designers believing themselves to be forever locked into the Adobe clown cloud are literally turkeys paying for Christmas.

Microsoft’s aquisirion of activision likely saved blizzard. MS only has 15% of the console market.

IMO the problem was the acquisition of Blizzard by Activision. I agree that MS will be a better steward than Activision who managed to completely ruins Blizzards reputation since the acquisition.

While saying nothing about the quality of their games or the decline thereof, Blizzard did a perfectly good job torching their reputation themselves when the report of their insane and inappropriate office antics was made public.

They also host more or less the entire PC gaming market.

The investors & founders of Figma clearly got the upside.

I really don't know why every business transaction has to be some kind of mission that will take us to Nirvana.

What is wrong with people taking money?

If Figma is bad for Developers let them build an alternative since they are developers or they can just use several of the many Figma alternatives.

Because monopolies hinge the growth of human development and should be avoided by any true capitalistic economy.

hinge -> hinder ?

Adobe isn't a monopoly it is simply domainant. Consumers have a choice to use other alternatives.

How does this "hinder the growth of human development"

Because they commonly swap to profit extraction models when they fail to integrate the acquisitions, and after that they typically shutter otherwise viable businesses. Most recently seen with Unity and Weta Technologies

If they buys a business and run it to the ground. That is their problem. Not the public's.

The public wil simply shift to an alternative.

> The public wil simply shift to an alternative.

"simply"

Why would Adobe pay 20$ Billion if "consumers have a choice to use other alternatives".. c'mon man.

You want to say Figma has no alternatives?

That works as-performant in a browser with collaboration, absolutely, there's no alternatives.

Maybe to block Figma from challenging Adobe's market position among other tools.

> How does this "hinder the growth of human development"

Easy. The larger any company gets, the more difficult it becomes to compete with them as customers of a potential competitor expect a certain set of features to be available to even consider migration, and thus the large company gets ever more and more market share over time. On top of that the large company may simply outspend a competitor in advertising or sue competitors for barely-legal patents.

Capitalism at its core is the ruthless elimination of inefficiencies, and competition is inefficiency (just look how many dozens of billions of VC were burned in the "gig economy" sector to get rid of competitors).

The problem for the development of humanity is that an entrenched, dominant/monopolist company has zero reasons to innovate and progress.

Consumers always have the opportunity to switch.

Also, VCs do fund competitors so it's not as black & white as you think.

> Consumers always have the opportunity to switch.

No, they don't always have a choice

> Consumers always have the opportunity to switch.

For that, there needs to be an alternative option. Just look at Walmart and how they destroy small food stores in a massive radius around them as no small retailer can compete with their scale.

All of that (including how dominant) is in the actual document the CMA published: https://assets.publishing.service.gov.uk/media/6565c3e262180...

Note the regulator phrases the concern, not as "monopoly", but as "substantial lessening of competition (SLC)".

In particular, page 6, item 25:

> We consider that Adobe’s and Figma’s platforms are characterised by network effects. These network effects cause the value of the respective platforms to increase with the number of users. These strengthen Adobe’s position in vector and raster editing software. They also strengthen Figma’s position in product design software. Network effects operate across markets. For example, the value of using Figma’s vector and raster editing offerings is greater the more Figma is used for product design, and vice-versa. Therefore the strength of the Parties’ positions in each of these markets is influenced by their strengths in the others, implying that the Parties exert multi-market competitive pressure on each other across vector editing, raster editing, and product design.

Page 9, item 41:

> The Parties identified more than 45 competitors in vector editing and more than 65 in raster editing. We undertook an assessment to identify the most relevant competitors in each of vector and raster editing software. We considered the extent to which these competitors are referred to in the Parties’ internal documents and in third-party evidence. We consider that very few competitors in vector editing software (Affinity and Corel Draw) and raster editing software (Affinity) provide any meaningful competitive constraint on Adobe’s product development for professional users, and that constraint is weak to moderate at most. This is particularly true for product design and related digital use cases

So when products compete on the market place, they shouldn't be allowed to win?

Even in sports there are winners & losers.

Sports also has rules. Can't pick up the ball and run across the pitch in association football. Can't use an anti-material rifle to knock the bails of the wickets in cricket. Can't respond to the Tennison Gambit in Chess with an Intercontinental Ballistic Missile: https://www.youtube.com/watch?v=E2xNlzsnPCQ

One of the economic rules in certain countries is "we like competition, don't thwart it".

Tell me you don't know about sports without telling me you don't know about sports.

There's a huge problem in most sports precisely because of money. Those that have the money have the best players, the best equipment, the best facilities etc. And yes, they spend money on exclusive contracts and deals so that others don't get the same.

Some sports even go as far as try and implement certain restrictions and limits so that money don't play such an outsized role

Uh, yes? That is literally the entire reason competition regulatory bodies like the CMA exist. To prevent monopolistic behavior and ensure no single entity gets big enough to squash all competition.

Every dominant piece of software is its own monopoly as long as the documents have a proprietary format and there exist no independent readers/writers.

it's monopoly, in professional setting in most cases is no possibility to use something else even if alternative tools is better for your specific task. It really similar to case of MS Word decades ago, now we have choose but not in the past.

Figma had chance to grow later to level where it could become Adobe competitor, now it's no hope that would be any competition any time soon.

Just to illustrate why I think that. Usually Adobe software used for everything so is no escape in most cases, but Figma became so widespread in popular specific case so it could really transform situation in way: use Adobe for everything but for UI/Web use only Figma. In that way everybody become committed enough to Figma ecosystem and they as company can start offering new tools which will able to capture Adobe businesses bit by bit.

That's every monopoly in history. Any smart monopoly allows just enough competition to tread water to show regulators that "hey, look, there's competition, we're just dominant".

> ..let them build an alternative..

Sure, let's just throw something together and it will work as good as something worth 20$ billion dollars..

The fun fact around this is that, whatever number you believe, each paying user is worth something north of 50-100k to Adobe. Figma has 4 million active users, maybe 5% signed up for a paid plan, will make 100k for each user at the acquisition price.

You honestly think someone needs $20bn to build a Figma alternative or clone?

Adobe clearly thought that or they wouldn't have paid that much, and so did their shareholders or they would have sued for wasting money.

They're paying for the network effects, not the app. They can build a Figma clone with less than $10 million, but good luck getting people to use it.

Supposing that one company's cash-value offer is equivalent to what it would cost to build, there would be no point in building a startup.

That value estimate is what the built thing plus company staff plus brand recognition plus timing is worth. Hardly the same thing as what it would cost to build again. Especially now knowing an effective UI/UX for the task.

> Adobe clearly thought that or they wouldn't have paid that much, and so did their shareholders or they would have sued for wasting money.

Value is not the same as cost. The cost of acquiring something is not the same as the cost of building something.

They said "worth 20bn" and it depends what you mean by build... writing the code or building the business around it that makes it valuable?

> What is wrong with people taking money?

Is the wrong question to ask.

Money is a means to facilitate self-organisation in the economy — it's not a good in itself, only as a means to an end.

For the most part, people are happy to not look too closely and just assume it's all good, but the entire point of regulators such as the Competition Markets Authority is to find the cases where a trade isn't good for the wider economy.

Then thr wider economy can decide if it's good or not, and choose alternatives. The only thing that would really stifle consumer choice is ip laws that could just claim the entire solution of Figma is off limits

If UK or Europe government think that merger of two US tech companies they don't control is bad for competition, they need to invest in creating a competition. And I am not talking about a million or two they give here and there, they need big investments.

It baffles me that Europe programmers has similar or better education and skills than US, but they get paid 1/3rd of US's salary for the same cost of living for senior positions.

I feel the issue here is that Figma has become the standard tool for UI design, it's what everyone uses and everyone knows. Which means there's a potentially huge collective cost if it goes downhill.

Endless consolidation isn't the only way to make money. There's plenty of money for Figma to make if they remain an independent company, _and_ their customers would be better off.

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