Google Acquires Windsurf for $2.4 Billion to Advance AI Coding Ambitions

Google has hired several key staff members from AI code generation startup Windsurf in a $2.4 billion deal. Windsurf CEO Varun Mohan, co-founder Douglas Chen, and some members of the coding tool's research and development team will join Google's DeepMind AI division. The deal will not give Google a controlling interest in Windsurf. Google will use Windsurf's technology under non-exclusive terms and the former Windsurf team will focus on agentic coding initiatives at Google DeepMind.

Alphabet's Google has announced a significant acquisition of key staff members from AI code generation startup Windsurf, marking a strategic move in the rapidly growing AI coding market. The deal, valued at $2.4 billion, includes Windsurf CEO Varun Mohan, co-founder Douglas Chen, and several members of the coding tool's research and development team joining Google's DeepMind AI division. The deal does not give Google a controlling stake in Windsurf but allows it to use the startup's technology under non-exclusive terms [1].

The deal comes after months of discussions between Windsurf and OpenAI, which had been in talks to acquire the startup for $3 billion. However, the talks collapsed due to concerns about OpenAI's existing agreement with Microsoft, which requires OpenAI to share its technology with Microsoft and host its models on Azure until 2030 [1]. This agreement prevented OpenAI from securing an exception for Windsurf.

Google's acquisition of Windsurf talent mirrors a broader trend among tech giants, who are increasingly turning to licensing agreements and talent acquisitions rather than traditional takeovers. These talent-first deals, often referred to as "acquihires," are seen as a way to sidestep regulatory scrutiny that often comes with outright acquisitions. Major tech firms are now facing closer attention from antitrust authorities [1].

The deal structure is similar to other recent "acquihires" by tech firms, such as Microsoft's $650 million deal with Inflection AI and Amazon's acquisition of Covariant's robotics foundation models. Unlike acquisitions that would give the buyer a controlling stake, these deals do not require a review by U.S. antitrust regulators. However, they could be probed if regulators believe they were structured to avoid those requirements or harm competition [2].

Windsurf investors will receive liquidity through the license fee and retain their stakes in the company, according to sources. The former Windsurf team will focus on agentic coding initiatives at Google DeepMind, primarily working on the Gemini project. "We're excited to welcome some top AI coding talent from Windsurf's team to Google DeepMind to advance our work in agentic coding," Google stated [3].

The acquisition highlights the intense competition in the AI coding market, with major tech companies vying for talent and technology to lead the next wave of AI advancements. Windsurf's head of business, Jeff Wang, has been appointed interim CEO, and Graham Moreno, vice president of global sales, will be president, effective immediately. The majority of Windsurf's employees will remain with the company, which has announced plans to prioritize innovation for its enterprise clients [2].

References:
[1] https://the-decoder.com/openai-loses-out-as-google-hires-windsurfs-ceo-and-top-talent/
[2] https://www.tbsnews.net/worldbiz/usa/google-hires-windsurf-execs-24-billion-deal-advance-ai-coding-ambitions-1186276
[3] https://finance.yahoo.com/news/google-hires-windsurf-ceo-researchers-225455421.html