Whilst the constituent companies of the Global Leaders portfolio are, for the most part, well established, they are also masters of adaption.


Adaption can often be regarded as a series of defensive measures to address competition but it is as easily understood, in the context of companies that outperform endemic growth rates, as grasping new and developing opportunities.

In this Deep Dive series we identify developing growth vectors for companies in the portfolio. We define growth vectors as elements of each companies’ business that will generate super-normal (that is above the endemic growth rate of a sector) for at least the next 10 years.

Adobe’s intention to purchase Figma has been a contentious proposal for both market participants and competition authorities.

Adobe is the world leader in content creation and digital design tools across visual medias.

Although it has grown to a near monopolistic position in these segments through its Creative Cloud suite, it has not made itself immune to disruptive challengers in a space that is notorious for its short incumbency lifespans.

The acquisition of Figma was not so much a case of Adobe trying to refresh a maturing product base, the company has still compounded revenues at an annual rate of 17 – 18% over the past 5 and 10 years.

Figma’s growth rate however is of an entirely different cadence. As a private company incepted in 2016, Figma has grown to US$400mn of annual recurring revenue in 2022, quintupling the US$80mn of ARR it achieved in 2021. It sits within a market segment – collaborative design tools – that is growing at 6 – 7% per year with an estimated addressable market of US$16bn by 2025.

The acquisition of such a fast growing competitor and credible threat explains both the price paid by Adobe (US$20bn, 20x sales) and the raised hackles of antitrust enforcers.

However, during Adobe’s journey to identify vectors of future growth that it has pursued through the avenue of acquisition, a potentially gigantic vector has arisen organically.

The breakthrough in performance of text to image models such as DALL-E, Stable Diffusion and Midjourney AI has for the first time created the possibility to generate novel visual content synthetically at minimal cost.

Adobe’s raison d’etre has always been to provide the tools to process and edit organically produced content. Being able to create the content that is then used within the Creative Cloud suite would be a powerful type of vertical integration up the “supply chain” of visual media.

Adobe Firefly is a generative AI model that produces visual content based on textual prompts by the user. It is trained on data sets derived from Adobe’s extensive licensed image library and natively integrated into the rest of the Creative Cloud suite to allow seamless integration between the production of an image and its manipulation.

To give a sense of this emergent opportunity set, DALL-E (a competing model) is producing 2 million images per day versus the entire Getty library of 80 million images. In this case organic growth vectors may prove more valuable than those acquired.

This Journal is taken from the Cerno Global Leaders Investment Report – Q1 2023, which can be read in full here.

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