Adobe’s chief executive has argued that a regulatory environment that prevents tech acquisitions will lead to less investment in start-ups, in a stark warning to competition authorities investigating the company’s proposed $20bn takeover of design software company Figma.
Shantanu Narayen told the Financial Times antitrust watchdogs should “worry about” how their decisions on dealmaking “enable innovation”.
“I’m a big believer that if companies don’t have exit strategies — and sometimes the exit strategy is within a larger company, and sometimes it is the IPO market — that will be a significant disincentive for people to invest in new start-ups,” he said.
The warning comes as the UK’s Competition and Markets Authority opened a probe into Adobe’s $20bn offer for Figma, which values the company at 50 times its annual recurring revenue. The regulator is expected to announce whether it will launch a full investigation this month, with similar action expected in the US and the EU.
Narayen is the latest leading tech executive who has gone public about the growing tendency by regulators to block takeover deals in recent years.
Last month, after the CMA blocked Microsoft’s $75bn acquisition of Activision Blizzard, both companies heavily criticised the UK for being unattractive to tech businesses and investment.
The CMA declined to comment on ongoing proceedings, but its chief executive Sarah Cardell told the UK government’s business and trade committee last month that: “Competition is a keystone and an absolutely foundational block of UK competitiveness. We want to have strong competition in markets. That promotes growth and innovation.”
Narayen said Adobe was engaging with all of the global regulators and was committed to working with them. Fostering a space for start-ups to grow to compete with the biggest players while still allowing tech mergers were “not mutually exclusive”, he argued.
“Whether you are the CMA, whether you’re the EU, whether you’re the US, or frankly, whether you’re an authority in any country on the planet right now, you should be saying: How can I create new venture?” said Narayen.
“If you don’t allow technology companies to invest, and if those technology companies don’t have global aspirations, they’re going to artificially limit what they can do.”
Adobe is aspiring to be the leader in generative AI, creating products that can quickly manipulate imagery. As excitement has grown over its use of the technology, Adobe’s shares have risen more than 25 per cent over the past six months.
On Thursday, the $192bn company expanded its AI offering, called Firefly, to business users. The system is able to generate images with the technology through text prompts and allows users to experiment with AI imagery overlaid on text. Firefly will be available through Google’s AI text chatbot Bard in the coming months.
The technology behind Firefly is trained on pictures in Adobe Stock, its library of stock images, as well as openly licensed content and public domain content where the copyright has expired. “Unlike other companies, [we] designed this to be commercially safe,” Narayen said.
Adobe’s move to limit the images used to train its AI system is designed to avoid copyright battles that have engulfed some AI companies and content rights holders.
Getty Images has filed two lawsuits against Stability AI, claiming that it misused its photos to train the Stable Diffusion AI image-generation system. The company is facing a class-action lawsuit in California from artists who claim its text-to-image generator misuses copyrighted works. Stability declined to comment.
Additional reporting by Richard Waters