Figma IPO warms up slowed tech market

Figma, a design software company, is preparing for an IPO in the US this summer, which runs from the second week in March to the first week in November.

This comes during a slowdown in software IPOs, with few enterprise software firms going public since late 2021.

The company reported a 46% year-on-year increase in first-quarter revenue, with high customer retention rates and strong gross margins.

Figma generated US$821 million in revenue over the past year and is expected to exceed US$1 billion this year.

Analysts estimate Figma’s valuation could exceed 20 times its annual revenue. Its Rule of 40 metric stands at 77, outperforming competitors like Palantir and Datadog.

However, Figma faces growing competition from AI advancements that could lower the cost of similar products.

To stay ahead, it is integrating AI into its tools, including one that converts prompts into prototypes.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Software IPO drought creates pent-up demand in a transformed market

The software IPO market has experienced a dramatic slowdown since its 2021 peak when a record 1,035 companies went public 1.

This drought is particularly stark in enterprise software, with only about a dozen companies raising more than $50 million going public since late 2021, the largest being SailPoint’s $1.4 billion offering in February 2025.

The current recovery is modest but building momentum, with 177 IPOs so far in 2025 compared to 225 for all of 2024 and just 154 in 2023 1.

This creates a unique environment for Figma’s debut, as institutional investors have fewer options for exposure to high-growth software companies at earlier stages.

The changing landscape is reflected in valuations: software stocks have recovered from their post-pandemic slump, with the iShares Expanded Tech-Software Sector ETF surpassing its 2021 peak after two difficult years.

Figma’s potential success could serve as an “icebreaker” that encourages other software companies to accelerate their IPO plans, potentially opening the floodgates for delayed offerings in the sector.