I'm a designer who turned into a writer who turned into a startup CEO. My mission is to help creators earn a living. Subscribe for essays on building an audience and earning a living as a creator.
A tale of three exits
Hey Reader,
Over the last couple weeks Twitter was buzzing about three companies that “exited” in unique ways:
Figma, Patagonia, and ConvertKit.
Today I want to break down the details of the exits, what makes them unique, and five lessons we can learn from them.
Figma sold to Adobe for an astounding $20 billion dollars
It’s—I think—the largest ever acquisition of a private company. They were at $400 million ARR growing 100% year over year, cash flow positive, at 140% net dollar retention, with amazing room to keep going.
The 50x multiple on revenue is due to the fact that given enough time they could dominate the design industry. Adobe had to buy Figma or be disrupted by them. I’ve already written about why Figma won (and will continue to win).
Two things are fascinating to me in this acquisition:
1. While I don’t think Figma should have sold, this is a much higher multiple than they’d get in the public markets. Especially right now. They created an incredible product and immense wealth in 10 years. It's a huge win and they deserve every bit of the success.
2. This acquisition is the best thing to happen to Adobe in a long time and I immediately started to buy their stock. But what’s crazy to me is that it started falling fast. Missing earnings targets was a factor, but overall the market thought Adobe significantly overpaid.
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Figma found an acquirer who saw the long-term potential of the company in a way that the public markets just wouldn’t (which was then proven by the drop in stock price). I think Adobe will rebound and I’ve been continuing to buy their stock ever since the acquisition.
Yvon Chouinard donated Patagonia to fight climate change
While we’ve seen billionaires like Bill Gates give away huge amounts of wealth for a wide range of causes, I’ve never seen someone donate an entire company to a single cause.
Yvon Chouinard has always been impact driven and Patagonia is an inspirational example. Read his public letter to learn more.
The especially crazy thing is that because he wants to be able to influence policy from the non-profit they are using a 501(c)(4) entity that is allowed to make political donations. It also means they don’t have to pay gift taxes, but they don’t get an itemized deduction on the donation (it doesn’t offset other income like a normal donation would).
ConvertKit did a non-traditional secondary round to get liquidity for team members
After turning down an acquisition offer last year I created a non-traditional method for the ConvertKit team to get liquidity. It wasn’t a traditional exit, but it solved many of the same purposes. Team members were able to unlock the value of what they’d created in tangible ways like saving for down payments.
Last week I told the story on Twitter in a viral thread that generated over 2 million views.
Normally a company has a few paths: stay private, sell the majority to investors (usually private equity), sell the entire company, go public.
I wanted to 1) get some liquidity for team members, 2) still own and control the company, 3) stay focused on our mission. This small secondary round, from long-time friends of ConvertKit, allowed us to do all three.
5 lessons from these unique exits
- There’s no faster way to build wealth than starting a company — At our $200 million valuation ConvertKit has been building more than $20 million in value per year over the last 10 years. Over the same time period Figma has been building wealth at 100x that rate ($2 billion per year). When you make something that is loved by hundreds of thousands of people, you’ll be rewarded for it.
- Design your journey — ConvertKit, Figma, and Patagonia are all very different companies, but each one is mission driven with a big impact. Patagonia has always had social good and environmental impact as a key part of everything they do. Figma won through great engineering and pioneering web technologies. ConvertKit is a self-funded company dedicated to creator success over company success. It’s not just about the outcome, choose a journey you’ll enjoy all the way along.
- Invent your own exit — In his letter about the future of Patagonia Yvon says:
Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.
Truth be told, there were no good options available. So, we created our own.
I love that. I did the same thing with ConvertKit.
I had established examples from companies (100% owned by one person, IPO, private exit, etc) and none of them felt right for ConvertKit. It took years of searching (and new tech from AngelList), but we found a system that is a perfect fit for us.
- Companies can be an incredible force for good — Successful companies are good at creating immense wealth and having a huge platform. Both of those can be used as a force for good. No matter what size your company is, I'd encourage you to use both your money and influence to push forward the causes you care about. At ConvertKit we donate every month to causes around meeting basic needs for creators (clean water, housing, medical care, safety, and education).
- The example you set can be just as important as the work you do — I believe there’s just as much value in the example you set as the outcomes. That’s why one of our values at ConvertKit is “Work in Public.”
ConvertKit’s secondary market will impact a couple hundred people, but hopefully the compensation and liquidity methods we are pioneering will be used by thousands of companies and impact millions long-term. I bet a lot of founders saw what Yvon did with Patagonia and started thinking about doing something similar with their company.
What takeaways do you have from these three exits? Hit reply and let me know.
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Imagine trying to explain our calendar system to an alien...
This Twitter thread made me laugh a lot. If you need a little break from work for a nerdy laugh, read this.
Have a good week,
Nathan
Nathan Barry
I'm a designer who turned into a writer who turned into a startup CEO. My mission is to help creators earn a living. Subscribe for essays on building an audience and earning a living as a creator.
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