OpenAI’s Windsurf deal is off, and Windsurf’s CEO is going to Google

https://web.archive.org/web/20250711213611/https://www.theve...

IMO other than the Microsoft IP issue, I think the biggest thing that has shifted since this acquisition was first in the works is Claude Code has absolutely exploded. Forking an IDE and all the expense that comes with that feels like a waste of effort, considering the number of free/open source CLI agentic tools that are out there.

Let's review the current state of things:

- Terminal CLI agents are several orders of magnitude less $$$ to develop than forking an entire IDE.

- CC is dead simple to onboard (use whatever IDE you're using now, with a simple extension for some UX improvements).

- Anthropic is free to aggressively undercut their own API margins (and middlemen like Cursor) in exchange for more predictable subscription revenue + training data access.

What does Cursor/Windsurf offer over VS Code + CC?

- Tab completion model (Cursor's remaining moat)

- Some UI niceties like "add selection to chat", and etc.

Personally I think this is a harbinger of where things are going. Cursor was fastest to $900M ARR and IMO will be fastest back down again.

It's another Character.ai situation [0]. Unfortunate for any employees who aren't founders or researchers, as they don't get any payout or a nice new job from this exit structure. In fact they lose their whole time invested at the company.

What a harsh time to work for an AI startup as a rank and file employee! I wonder how the founders justify going along with it inside their mind.

[0] Character.ai CEO Noam Shazeer Returns to Google https://news.ycombinator.com/item?id=41141112 - 11 months ago (87 comments)

Edit: Thank you @jonny_eh for the clarification. I can't imagine it feels awesome being a leftover but at least you vested out. "Take the money and leave" is still a bit raw when the founders and researchers are now getting the initial payout + generous Google RSU's.

Cursor (and Garry Tan’s X post) has shown us that the VC money is propping up these companies astounding growth, the only way for them to become profitable is to increase the cost per a request, which means they need to innovate like crazy.

The moat is paper thin.

GitHub has open sourced copilot.

The open source community is working hard on their own projects.

No doubt Cursor is moving fast to create amazing innovations, but if the competition only focuses on thin wrappers they are not worth the billion dollar valuations.

I love watching this space as it is moving extremely fast.

I went from Emacs to VS Code, then to Cursor, next to Claude Code, which is so good that I feel like I am having half a dozen junior devs at my fingertips, 24/7.

Since Claude Code is cli based, I reviewed my cli toolset: Migrated from iTerm2 to Ghostty and Tmux, from Cursor to NeoVim (my God is it good!).

Just had a 14h workday with this tooling. It’s so good that I complete the work of weeks and months within days! Absolutely beast.

At this point I am thinking IDEs do not reflect the changing reality of software development. They are designed for navigating project folders, writing / changing files. But I don’t review files that much anymore. I rather write prompts, watch Claude Code create a plan, implement it, even write meaningful commit messages.

Yes I can navigate the project with neovim, yes I can make commits in git and in lazygit, but my task is best spent in designing, planning, prompting, reviewing and testing.

This whole situation feels shockingly close to the Meta/Scale situation, where founders and specific employees were plucked out, and effectively gutted any future prospects for the company.

At least in the Scale case there seemed to be some form of payout to employees and equity holders, but this takes it a whole lot further by just throwing out all other employees.

There is supposed to be the concept that “all common stock is the same”. These fake-acquisitions completely undermine that.

So Google, Meta, and Microsoft will just hollow out the best AI startups of their talent instead of buying them - out of fear of monopoly lawsuits I'm assuming?

Nice plan I guess. Kind of obvious to spot though.

I never knew anyone who used Windsurf. These AI acquisitions have been unbelievable(in a bad way). WIX acquired some garbage Lovable.dev clone for 80 million. I think many of us are waiting for this bubble to pop(economy will likely pop too)

All of this game of thrones is going to create an amazing documentary if AI capabilities taper off and valuations vaporize.

Works out for Google and the C-suite. Horrible for the employees. These fake-acquisitions are effectively arbitrage against employees, who get left holding nothing. Should be illegal and regulated.

Not sure how the VCs get their cut. I'm guessing that Google can balance it out by participating in rounds for other startups in that VC's porfolio.

I was so surprised (or shocked) to hear that Windsurf was getting acquired for 3 billion dollars, I made an HN post asking about the truth of that news - https://news.ycombinator.com/item?id=43933825. HN's system didn't like my tone I guess and removed it, lol.

But in any case, I just can't see how AI code editors like Windsurf or Cursor, without any proprietary model, can be valued at billions. What's the underlying IP that justifies these valuations?

Windsurf and Cursor are in the business of reselling ChatGPT and Claude at a loss, but the tech itself is not impressive at all

> Google will instead hire Windsurf CEO Varun Mohan, cofounder Douglas Chen, and some of Windsurf’s R&D employees and bring them onto the Google DeepMind team, [...] Google will not have any control over nor a stake in Windsurf, but it will take a non-exclusive license to some of Windsurf’s technology. [...] Google didn’t share how much it was paying to bring on the team. OpenAI was previously reported to be buying Windsurf for $3 billion.

Why not an acquisition?

How did Google get Windsurf and investors to agree to this maneuver that decapitated the leadership and key talent, without a big exit event for everyone?

My read of the article: "Here's x% of what OpenAI offered you, you waive legal challenges while we cherry-pick your people and license the tech in their heads, and you can keep the company, and everyone left behind can promote themselves to fill the vacancies."

I'm not surprised. I started using Windsurf when it came out because I liked its UX better than Cursor's.

However, while Cursor and GH Copilot improved, Windsurf went in the opposite direction. On each update, I started to get more and more issues. The agent often tried to run shell commands, and it hung up, or I found minor UI bugs. One day, I decided to give GH Copilot another chance, and I was surprised by how it evolved, to the point that it worked better than Windsurf for my usage. I don’t know what happened internally at Windsurf, but I notice the degradation as a user. If my case indicates what happened to other users, maybe OpenAI saw declining subscriptions and canceled the deal.

Update:

> Google hires Windsurf CEO Varun Mohan, others in $2.4 billion AI talent deal

https://www.cnbc.com/2025/07/11/google-windsurf-ceo-varun-mo...

It's unclear if OpenAI cancelled the deal, or Google poached them? Either way, this season of "OpenAI Drama" is wild. First Meta, now Google. Your turn Amazon / Microsoft.

> OpenAI’s deal to buy Windsurf is off, and Google will instead hire Windsurf CEO Varun Mohan, cofounder Douglas Chen, and some of Windsurf’s R&D employees and bring them onto the Google DeepMind team, Google and Windsurf announced Friday.

> Mohan and the Windsurf employees will focus on agentic coding efforts at Google DeepMind and work largely on Gemini. Google will not have any control over nor a stake in Windsurf, but it will take a non-exclusive license to some of Windsurf’s technology.

Sounds to me like they're "hiring" them like one "hires" a consultant?

I don't know anyone who heard or used Windsurf outside the Bay Area. Even Cursor feels very Bay Area bubbly (although that is the market to go after if you're in ai dev tools).

I did not see this coming. Wow. The game of thrones in SV.

I wonder what happened with the OpenAI deal. Anyone have any guesses? My first guess is "Look at Claude Code, we can do this ourselves." But, I am likely thinking too simply.

edit: does this mean that Windsurf and its users will stop being iced-out by Anthropic? Or, is this the end of Windsurf?

I have been using Windsurf for few months. They even have their own AI model SWE-1 model. I really liked using Windsurf. They also have integrations with other IDEs ex: jetbrains, VS code, etc.

This week I have been using Claude Code and Windsurf side by side. I would make change with one, stash it, ask the other for similar change and then would diff it.

Overall Windsurf was pretty on a par with Claude code.

Funny to see this today.

I'm a rank and file dev at a non-big tech company and I got a call from a Windsurf sales rep this week who I had connected with on LinkedIn the day before (I never gave them my number). They told me my company was in talks with Windsurf about a licensing deal but that they would give me a 30 day trial of an enterprise account for use on personal projects to let me try it in advance. I guess the idea for them is to build enthusiasm among devs in the company?

Is this a standard sales strategy for products like this? It seems pretty aggressive to me but I'm just an engineer so I wouldn't know.

There’s a lot of talk about Claude Code in here, and I agree it’s a great agentic coding tool. One of the benefits of Cursor & Windsurf is/was the ease for smaller companies to setup Team accounts and have control over spend.

Claude Code I think misses this. You can get an enterprise account if you commit to over, what.. 70 seats annually?

If you’re an individual you can get Max 5x/20x ..

But for smaller companies, I don’t think they are addressing that space. Am I wrong? Are there any Agentic tools like Claude Code that can provide a fixed cost per user?

Nice to get a sanity check that confirms Windsurf was never really worth $3B to all those who thought that number was ridiculous.

Are these "acquihire & license" the new M&A...? I recall hearing that this was a "hack" to avoid DOJ and FTC scrutiny over acquisitions, but I have no clue how such deals are structured. Anyone care to chime in?

This my friends is how the next iteration of venture capital contract templates becomes even longer...

Otherwise, normally with the amount of capital raised by Windsurf, the founders must have signed some kind of non-compete for the event of a bad-leaver (which this obviously is). Guess covering these penalties was just part of Google's deal, hm?

OpenAI needs to up their game on Codex to be on par with Claude Code. o3 is a better planner relative to Opus.

For the love of God, can we get a reboot of the Silicon Valley television show? Just on AI. Like when they wrapped it, they wrapped it on AI usage. So, it's got the perfect arc for a reboot that focuses perfectly on AI.

This certainly aligns with my own usage. I'm currently using OpenAI's own Codex 50:1 compared to Windsurf. For me, I'd rather take some time to create a good quality prompt and have it work away for a few minutes and create a material delta. It isn't always perfect, and I often have to make a few tweaks myself, but it is much nicer and waiting around and watching Windsurf bang around on a tiny part of the solution. Windsurf is still nice to use for quick UI iteration however.

How does this happens?

They raised A, B, and C round (according to CrunchBase), and then the founders just walk away and get a job/deal at Google?

Pour one out for the regular employees not getting absorbed by Google and suddenly not millionaires like they imagined they were a week ago.

Not every exit is a liquidity event these days. Startup employees take note.

How long does Windsurf go on now? Losing your CEO to a poach job not even an acquihire must blow up any fund raising plans.

Kilo Code CEO here. We’d like to welcome ex-Windsurf users by offering you $100 in credits. :D We'd love to show how through open source there is a better way (better community, more transparent pricing, won't mess with your or the product). https://blog.kilocode.ai/p/windsurf-is-over-switch-to-open-s...

When Claude kind of cut them off, they realized these AI Agentic tools are as good as your model, little to no moat here.

And it was a crazy deal to begin with, for reference JetBrains who's building IDEs for 24 years are evaluated at $7 billions

If this isn't some kind of sign of the times, idk what is. This is too far.

According to The Information, Microsoft gaining access to Windsurf’s IP if OpenAI acquired them was a factor: https://www.theinformation.com/articles/openai-windsurf-brea... (paywalled)

I don't know if you noticed but cursors language server aspect that runs the coding edits and stuff like that from a server to the workstation is a lot better than windsurf.

Windsurf phone's home on every code edit that you have and takes on 30% load on your servers or on your workstation depending on what you're running.

I would strongly discourage the use of windsurf on your systems.

Case in point their AI model that they just built.

Honestly there's no value that windsurf, cursor and all the other VSCode forks provide that couldn't be provided as an extension and even then - none of them perform as well for agentic coding as Cline / Roo Code (debates about the subscription pricing aside due to people often not realising their model limits, public US only based APIs, pay for useful API limits etc aside).

Wow, this is a pretty fascinating twist. First OpenAI's $3B deal falls through, and now Google swoops in to poach the key talent anyway? Classic big-tech maneuvering

i would be so pissed if I was an employee who got nothing out of the deal and left to dry now

Wow must have seen the numbers and decideed they wanted to call it off. Not a good business model probably so the human talent is where you find the best amount. Still why would anyone ever want to work at Google? Don't they know they are contributing to a system that covertly disseminates information they want you to see. Especially the AI models. Has anyone ever wondered about the training data sometimes? What would people think of them if they knew they had the entire pestein list in their hands but decided its better to protect the ones that pay them. People need to reconsider what they believe from AI, it can be extremely abused to scale narratives.

Just curious - would this negatively affect OpenAI's ability to acquire companies in the future?

https://archive.is/Rdt3z

I guess masks are completely off now. We can see who sells out to the highest bidder and who won't sell because they care more about the mission.

Bullet dodged.

Windsurf's value to OpenAI was for the latter to "see the whole chessboard" of context, which is helpful when you're training models to be good at coding.

But codex (and Claude Code) fulfill this from the CLI, and it's a first-party utility, not an acquisition.

Sounds like the death knell for Open AI. They can't outswim the FAANG sharks. Once Microsoft is out, it's over for them.

Anyone know what the deal was? Can it be scrapped like that? I expected to read more info about that but it's not even mentioned.

So the result of aggressively scrutinizing big tech acquisitions is acquihires, not a more competitive tech ecosystem with say more IPO’s.

The libertarian spin on this would be government should have never scrutinized acquisitions and the result is just worse for everyone.

The progressive spin would be to now ban acquihires somehow, and then whatever new legal invention will be created next. I can imagine the next step being, creating a consulting company out of your startup and then selling yourself as consultants to big techs. Now you are neither acquired nor technically acqui-hired and the whackamole continues.

At some point, we need to realize the solution is the culture of people involved. If the government could just ask to reduce acquisitions to make the ecosystem more competitive and companies tried following it in spirit to the best of their ability, we might have much better results than whatever we have now. When culture degrades, the govt can’t trust companies, the companies can’t trust the govt, everything just gets worse, regardless of what rules you write and enforce.

dang, I feel like my Bay to Breaker tote bag value just went up 10x right?

The title made sense until the comma, and then it didn’t :)

This sounds terrible if they're just taking management and key employees?

Imagine backing this startup and the founder team takes a parachute...

I wonder if this is a result of the previously reported clashes between OpenAI and Microsoft over access to the Windsurf IP (under their investment agreement)

This deal always looked strange in the first place. The usage of Windsurf was significantly lower than Cursor and Copilot and somehow it was worth $3B.

Given the release of Claude Code, it was already over for them.

I really think that Apple is smart to sideline this shitshow.

Does anyone know which side cancelled the deal?

What could Google have possible offered? Must have been astronomical. Sundar has been aggressive ever since OpenAI knocked the wind out of them by being first release gpt.

https://archive.is/SkCKz

What if OpenAI is buying Cursor instead?

The founders fucked over the employees and the investors and sold out. I guess they don’t care if they are worth $200M each but they fucked every employee that poured their heart out into that company.

I hope no one works for them again.

Could anyone explain the implications of this for Windsurf as a company? Are they going to close?

Can someone explain how this works financially for the acquihired? I know they aren’t joining like a regular employee with a high TC. Does Google offer them a giant multi-million (billion?) dollar signing bonus? Why would they tank the value of the company they own just to be another employee at Google?

I can’t wait for these companies to start laying people off so I can buy their house. They are inflating real estate prices with their dumb AI money.

nonexclusive proprietary licensing at its zenith

I wonder how these two events came to be declared in the same news release.

and Windsurf employees have worthless equity and no CEO

loool dead

Zuck swoops in and hire them 100mm a piece.

Smart move, I always wonder if they have disposable money to spend on stuff like this and figure out what to do with it after.

Looks like Sama can’t catch a break.

What is the source Verge? Give us a link more than "Google and Windsurf announced Friday"

Lol.

I commented on the OG thread something like "weird since MSFT owns VS Code" and got downvoted to oblivion.

Yet here we are, always right :).

https://archive.today/urwCT

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@dang - The title’s wording suggest that OpenAI’s CEO is leaving, not Windsurf. A more accurate title might be: “Windsurf’s deal with OpenAI is off, and its CEO is going to Google”

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C-level executives get paid. Labor gets stuck grinding at Google. What a waste. Google will probably shelve/hoard the IP from Windsurf.

Is Lina Khan to blame for this new acquihire meta? She was very aggressive in blocking any tech acquisition during her time and ever since we have seen more and more acquihires which I believe these companies are using to prevent themselves from getting sued.

Google is having a hard time acquiring Wiz for 32b, and if it's blocked they owe 3.2b to Wiz. So why risk it when you can just spend the money to hire the talent behind it and spend a few month building out a new product.