Windsurf CEO at Google, OpenAI Acquisition Fails - Tech News

Windsurf Acquisition by OpenAI Collapses, Google Steps In

The anticipated $3 billion acquisition of the rapidly growing AI coding startup, Windsurf, by OpenAI has been terminated, as reported by The Verge on Friday.

In a surprising development, Google DeepMind is now onboarding Windsurf’s CEO, Varun Mohan, co-founder Douglas Chen, and several key researchers from the company. This hiring was officially confirmed by a Google spokesperson in a statement provided to TechCrunch.

Google's Licensing Agreement

It’s important to note that Google is not acquiring an ownership stake in Windsurf, nor will it exert control over the startup’s operations. However, Google has secured a nonexclusive license to utilize specific Windsurf technologies.

This arrangement allows Windsurf to continue licensing its technology to other entities independently. Bloomberg has reported that Google is investing $2.4 billion to secure this technology license and the expertise of Windsurf’s leading personnel.

“We are pleased to welcome highly skilled AI coding professionals from the Windsurf team to Google DeepMind, furthering our advancements in agentic coding,” stated Google spokesperson Chris Pappas in correspondence with TechCrunch.

The Rise of "Reverse-Acquihire" Deals

This situation exemplifies a growing trend within the AI landscape known as a “reverse-acquihire.” This involves a larger company recruiting top talent and licensing technology from a startup without completing a full acquisition.

Google previously engaged in a similar strategy by recruiting Noam Shazeer, the CEO of Character.AI, and Microsoft did the same with Mustafa Suleyman. These types of deals allow major technology companies to strengthen their AI capabilities while potentially avoiding increased regulatory oversight.

Mohan and Chen jointly expressed their enthusiasm, stating in a communication to TechCrunch, “We are excited to join Google DeepMind alongside members of the Windsurf team. We take pride in Windsurf’s accomplishments over the past four years and look forward to its continued progress with their exceptional team, initiating the next stage of development.”

Windsurf's Future Leadership and Operations

Effective Friday, Jeff Wang, Windsurf’s head of business, will assume the role of interim CEO, as announced via social media. The majority of Windsurf’s 250-person team will remain with the company, continuing to provide AI coding solutions to enterprise clients.

The potential acquisition by OpenAI reportedly created friction during contract negotiations with Microsoft. Microsoft currently possesses access to all of OpenAI’s intellectual property, but OpenAI was reportedly hesitant to extend that access to Windsurf’s AI coding technology, according to prior reporting by the Wall Street Journal.

Earlier on Friday, Fortune reported that the exclusivity window for OpenAI’s acquisition offer had lapsed, allowing Windsurf to consider alternative proposals. It appears Windsurf acted swiftly on this opportunity.

Windsurf's Rapid Growth and Market Position

Windsurf has experienced significant growth in recent months, becoming a prominent player in the AI coding startup sector. In April, the company’s Annual Recurring Revenue (ARR) reached approximately $100 million, a substantial increase from $40 million just months prior, as previously reported by TechCrunch.

This rapid expansion attracted interest from both OpenAI and, ultimately, Google.

Impact on Google's AI Coding Capabilities

The addition of Mohan, Chen, and other Windsurf leaders is expected to significantly enhance Google’s capacity to develop advanced AI coding tools. AI model providers are increasingly focusing on offering AI-powered coding applications to attract developers.

Anthropic has seen substantial revenue growth driven by its AI coding tool, Claude Code, while OpenAI continues to promote Codex, its AI coding agent, to software engineers.

Challenges Ahead for Windsurf

Windsurf now faces a more uncertain future as a result of this agreement. Other AI startups that have experienced the departure of key leaders have often struggled to maintain their previous momentum. Scale AI experienced customer attrition following its deal with Meta, and Inflection was forced to completely shift its focus after its agreement with Microsoft.

A similar outcome for Windsurf appears probable.

Note: This article was updated at 7:25 pm PT to include the reported amount Google paid Windsurf as part of the deal.