In 2018 Figma did $4M of ARR. Soon after I had a VC job interview where I did a Figma case study. I built a model with Figma becoming a $19B company in 2025

I didn’t get the job. They said my analysis was “unrealistic”

A thread on how the best companies compound unexpectedly…

In Feb 2019 Figma raised at a $440M post from Sequoia.

I remember even folks at SoftBank thought that was crazy (and this was the Vision Fund at its most aggressive)

“Over 100x ARR? Insanity.”

This was before the world got crazy in 2020

The feedback from my job interview?

(1) I believed Figma would grow faster than they realistically could

(2) My revenue multiple on exit was unrealistic.

Let’s start with revenue.

The rule of thumb for revenue growth is for a good company to triple-triple-double-double-double in revenue over the course of ~5 years.

Based on Figma’s trajectory, that would get them to ~$135M ARR by 2022. My estimate? $200M ARR. I felt pretty dumb when they pointed that out.

So how did Figma actually do?

They smashed that forecast. Based on what I’ve read they’re currently at ~$400M ARR and doubling.

You see this underestimation with public companies too.

When Crowdstrike ($CRWD) went public in 2019 they had ~$250M of revenue

The consensus then was that their 2022 revenue would be under $1B.

Today? On track to surpass $2B.

My second mistake in the interview? My revenue multiple.

In early 2019 the average SaaS company was trading at ~10-11x revenue.

I was forecasting for a 2025 IPO. I thought, “I think Figma could be $700M ARR, growing 60%+… this deserves a premium.”

So I had it trading at 20x

Again, this was before the market went crazy and we saw 50x ARR multiples become normal.

Instead, I was told “Sequoia will probably expect a 3-5x return on their investment.”

3-5x on $440M? $1.3B – $2.2B

“That should be the expected exit value. Make the math work.”

Now I had what my interviewer called “a compounding error.”

I had dramatically overestimated their revenue growth, showing them get to almost $1B ARR in 2025.

And then I had them trade at an “insane” 20x multiple.

The result? A $19.5B IPO in 2025.

In the end my interviewer was right. My analysis was unrealistic. Unrealistically conservative.

Instead of $200M ARR in 2022? Figma would do $400M (and the year isn’t over yet).

Instead of $19.5B in 2025? They’d be acquired for $20B in 2022.

So what’s the takeaway?

“Every company will crush it and deserves a ‘crazy’ multiple along the way?” No.

There is a concept of financial gravity. It is REALLY difficult for companies to continue to grow at exponential rates.

Eventually, financial gravity slows them down.

But it’s important to recognize when a company has something special that allows them to defy gravity.

Like AWS, just continuing to experience monster growth to $62B+ of revenue in 2021.

It’s also important to put this particular case into perspective. My favorite framing comes from @hunterwalk

How did Adobe decide to pay $20B? It was less about an excel model.

“What percent of our market cap do we need to spend to protect the rest of it?”

Not every company will have the same market, or competitors, or combo of PLG / top-down sales.

But the very best companies will have something special that allows them to defy financial gravity. So look for that.

I love unpacking investor thought processes like this, so if you enjoyed this thread follow me @kwharrison13

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