This is a highly speculative post, with conjectures presented as facts. Some things that irked me:
- Cursor did not hire Anthropic's "researchers". It hired the guys who built Claude code (PM and dev). Who then promptly went back to Anthropic in 14 days. A researcher for Cursor need not come from Anthropic either. One high profile recruit for them was Jack Gallagher (Midjourney) who is probably one of the best at RL.
- Google's deal with Windsurf is structured that way because they likely could not directly acquire, or were not confident that it would have gotten past the antitrust. A signal for that is such deal increased in last few years after FTC refused to allow any deal over $100M or so. Microsoft has done such deals too. Meta would have acquired scale ai in older times. Not sure with Openai, but they arent as scrutinized as Google for such deals. To imply that this means Google did not care about ARR is not justified. and then google licensed Windsurf's IP too.
- Openai's agreements with Microsoft is more probable than they did not complete the acquisition because of negative gross margins.
- Plus, the old adage about how a growing startup is worth more because of a stellar team. You strip a team away and still get 2x multiple is sure enough valuing the current ARR highly.
I thought the userbase is valuable. A sale at this point made sense because they might not have been to get the money if they waited a year. Reasons laid out in the article are not why I think so.
Every single article on this domain is just human hallucination. Little to none research and due diligence done.
By the way, The latest article before this one was "tokens are getting more expensive". (One week before $1.25/$10 GPT5 releases. Talking about aging like milk...)
> Google's deal with Windsurf is structured that way because they likely could not directly acquire, or were not confident that it would have gotten past the antitrust. A signal for that is such deal increased in last few years after FTC refused to allow any deal over $100M or so.
Any proof of this? It's quite speculative. Also FTC scrutiny is not escaped if you only acquire a percentage of a company to avoid antitrust scrutiny (as you claim Meta did, speaking of which...)
> Meta would have acquired scale ai in older times
According to reporting, Meta was solely interested in Wang and his inner circle, and did not want to acquire a significant stake in the company. Wang negotiated them UP. It's not as if they wanted to buy the whole thing at its previous valuation, let alone a higher valuation. (source: https://archive.is/ZPoNJ)
> Google's deal with Windsurf is structured that way because they likely could not directly acquire, or were not confident that it would have gotten past the antitrust
I've been following OpenAI, Google, and Microsoft's acquisitions over the last five years, and the US government has given them the green light when it comes to AI. It makes sense since the FTC and DOJ directors are appointed by the government, and the government is concerned about China's advances in AI.
Also, Google pulled the same move Microsoft did with Inflection AI. They hired Windsurf's CEO, its co-founder, and other key people, and licensed Windsurfs codebase without acquiring the company. It was the smartest business move they could make.
So from a business and political point of view, your assumption doesn't hold up.
> Openai's agreements with Microsoft is more probable than they did not complete the acquisition because of negative gross margins.
This is also incorrect and the first time I've heard this reason. Executives have already told reporters that OpenAI and Microsoft have an agreement, and Microsoft doesn't want OpenAI entering the software development arena. They hold the keys to GitHub, and that's keeping everyone out for now, including Google.
> Plus, the old adage about how a growing startup is worth more because of a stellar team. You strip a team away and still get 2x multiple is sure enough valuing the current ARR highly.
I don't think so. Investors back people first, and in AI, the people are everything. Just look at how much Meta is willing to pay top AI researchers. OpenAI, Microsoft, and Google are all chasing the same talent. Knowledge is extremely valuable when it comes to AI/ML.
Google learned this the hard way when it let Noam Shazeer leave. When they realised how valuable he was, they ended up paying $2.7 billion to bring him back.
openai's $3b acquisition of windsurf falls apart. after months of negotiations, they walk away.
That isn't accurate. Microsoft was an OpenAI investor and had rights and for MS reasons, exercised them. That's what killed the deal.
google announces they're paying $2.4b to hire windsurf's ceo and 41 researchers for deepmind. not to acquire windsurf. just the humans. the same day openai walks. what a coincidence!
That isn't accurate as well. Google also licensed the Windsurf IP.
My question is what happened to the $2.4B? Apparently very little of it made its way to the Windsurf employees, as #2 tweeted last week. It wasn't an acquisition although Cognition was. Cognition bought a company for $250M that just got a check for $2.4B. How exactly did this work?
We don't know what deal they made with the VCs, but they could have multiple liquidation preference agreements.
> A liquidation preference multiple (e.g., 1x, 2x) determines how much investors receive before any distribution to common shareholders. A 2x preference means investors are entitled to twice their initial investment amount before others receive payouts.
If a #2 employee of such a unicorn startup with so much funding got dealt such a blow in this deal, what does this tell us about our prospects as employees of any startup?
Isn't this an admission that you cannot get rich by getting a job at a hot private early-stage startup? Even if you're the employee #2?
That you'd be far more likely to get rich by getting a job at Google / Meta / Amazon, getting rich through RSU time-of-award to time-of-disposition growth, then doing private investing in a company like Windsurf, then getting even richer as an investor, all actual employees creating value be damned?
Firends who are windsurf employees tell me the in-office opinion is that the founder(s) were paid $.5bn each, and the rest was distributed amongst the researchers they poached.
this reminds me when early on in Github Copilot journey when people were asking "what if it accidentally reproduces GPL code and I get sued" and Microsoft said they'll cover the legal costs for anyone using Github Copilot.
The big players (Google, Microsoft, Meta, Nvidia) don't want ai startups failing. In fact they are terrified of that. Can you imagine the market shock if windsurf just went under in 1 year. How fearful all investors would be? How the whole market is gonna react? We are told that AI is basically a money printer. If you release a product for $20/month and a couple of months later other companies (with much better margins by definition) release competitor for $250 then $300 then $400 something is clearly not adding up even among the higher numbers.
The way VC investments work is that it's all very incestuous. Google, MS, etc. have lots of money in VC funded AI startups. Instead of letting them fail the hard way, they usually fail in a soft way via mergers, acquihires, etc.
Mostly when you read about a big company buying a small startup, it's actually an investor bail out. The company has technically failed and the investors basically want to get rid of the failing company in a way that doesn't make them look like muppets. So there's a nice press release, an undisclosed share swap, and tada another successful exit .. of a company and technology that you will never hear from again. This is nothing new. This is what happens to most startups that don't IPO.
Codium was alright a few years ago but by now it's a commodity. Amazing idea of having a little side bar in VS code with a bare bones chat UI that you could hookup to your openAI API key. They build bits and pieces of tech with some merit to it since then of course. But nothing that cannot and is not being replicated by others. Same with Cursor, windsurf and all the other niche players in this market. None of these companies has much of a moat.
And at this point all the big companies have their in house built solutions: Claude Code, Google has Julius, OpenAI has codex, MS has co-pilot, AWS recently launched their own thing. Clearly building these things is not that hard. All the IP is in the models and infrastructure.
Windsurf was just a recent rebrand of Codeium which was founded in 2021 and had plenty of enterprise customers using their self-hosted models well before they decided to make an IDE. I think this article is surprisingly thin on background.
If it is true that these wrapper companies can't find positive sum economies for their product offerings, there will be a point in time where we will see them fail and it will cause a domino effect, rolling over to the big LLM providers and ultimately NVDA. This is highly speculative, but currently there are some realistic pointers to such a scenario.
In such a case, I think we will see a move to smaller, domain specific models. I think if the first cycle of the AI age is large, general models, the second will be smaller, domain specific ones that we can run on retail machines.
I like how there’s like 17 instances of using square brackets as parentheses, but also actual parentheses, & almost nothing is capitalized, even acronyms, except for the cases where they feel like acronyms actually should be capitalized. and the .log file is a screenshot of cat-ing a .txt file which has formatting in it
> and the .log file is a screenshot of cat-ing a .txt file which has formatting in it
I guess replacing some bytes of text with 30KB of PNG is what happens when the platform you've chosen to use doesn't support the formatting you actually want.
Putting aside the model and researchers windsurf have, is the windsurf business model sound? If not, does potential acquirer think the business model can be adjusted within reasonable time to create value?
If the answer is no for the whole ecosystem, it’s going to be much harder to see acquisition of companies like this.
When I used to play Transport Tycoon Deluxe the most annoying were new companies which emerged every 6 months after I bought the last one. I had to buy them quickly because otherwise they would build their tracks and grow and later it would be harder to buy them...
Hmmm... I'm just saying things that are loosely related
The premise of this article seems to be that the researchers at Windsurf have been able to learn amazing things thanks to near unlimited VC money, increasing their value to astounding numbers.
That may be true (although I doubt the numbers add up).
But what is keeping those researchers from walking away, or underperform whenever they feel like it? Giving them a lot of money surely isn't going to motivate them to work harder.
It's probably giving them access to one of the world's largest clusters of compute that lures them in.
I honestly think all of these VSCode forks are moving in the wrong direction. They are horseless carriages, old-style tools with AI stapled to the side. I'm trying to figure out what agentic coding should look like, and I built Crystal as an agent management platform first, IDE second.
ugh.. why are you always plugging this stuff every thread.giving very desperate scammy vibes.
launching multiple claudes in gitworktrees is not that hard. i have like 25 line bash function that does all that stuff in your project without nasty electron stuff.
ankit219|6 months ago
- Cursor did not hire Anthropic's "researchers". It hired the guys who built Claude code (PM and dev). Who then promptly went back to Anthropic in 14 days. A researcher for Cursor need not come from Anthropic either. One high profile recruit for them was Jack Gallagher (Midjourney) who is probably one of the best at RL.
- Google's deal with Windsurf is structured that way because they likely could not directly acquire, or were not confident that it would have gotten past the antitrust. A signal for that is such deal increased in last few years after FTC refused to allow any deal over $100M or so. Microsoft has done such deals too. Meta would have acquired scale ai in older times. Not sure with Openai, but they arent as scrutinized as Google for such deals. To imply that this means Google did not care about ARR is not justified. and then google licensed Windsurf's IP too.
- Openai's agreements with Microsoft is more probable than they did not complete the acquisition because of negative gross margins.
- Plus, the old adage about how a growing startup is worth more because of a stellar team. You strip a team away and still get 2x multiple is sure enough valuing the current ARR highly.
I thought the userbase is valuable. A sale at this point made sense because they might not have been to get the money if they waited a year. Reasons laid out in the article are not why I think so.
raincole|6 months ago
By the way, The latest article before this one was "tokens are getting more expensive". (One week before $1.25/$10 GPT5 releases. Talking about aging like milk...)
aprilthird2021|6 months ago
Any proof of this? It's quite speculative. Also FTC scrutiny is not escaped if you only acquire a percentage of a company to avoid antitrust scrutiny (as you claim Meta did, speaking of which...)
> Meta would have acquired scale ai in older times
According to reporting, Meta was solely interested in Wang and his inner circle, and did not want to acquire a significant stake in the company. Wang negotiated them UP. It's not as if they wanted to buy the whole thing at its previous valuation, let alone a higher valuation. (source: https://archive.is/ZPoNJ)
pyman|6 months ago
I've been following OpenAI, Google, and Microsoft's acquisitions over the last five years, and the US government has given them the green light when it comes to AI. It makes sense since the FTC and DOJ directors are appointed by the government, and the government is concerned about China's advances in AI.
Also, Google pulled the same move Microsoft did with Inflection AI. They hired Windsurf's CEO, its co-founder, and other key people, and licensed Windsurfs codebase without acquiring the company. It was the smartest business move they could make.
So from a business and political point of view, your assumption doesn't hold up.
> Openai's agreements with Microsoft is more probable than they did not complete the acquisition because of negative gross margins.
This is also incorrect and the first time I've heard this reason. Executives have already told reporters that OpenAI and Microsoft have an agreement, and Microsoft doesn't want OpenAI entering the software development arena. They hold the keys to GitHub, and that's keeping everyone out for now, including Google.
> Plus, the old adage about how a growing startup is worth more because of a stellar team. You strip a team away and still get 2x multiple is sure enough valuing the current ARR highly.
I don't think so. Investors back people first, and in AI, the people are everything. Just look at how much Meta is willing to pay top AI researchers. OpenAI, Microsoft, and Google are all chasing the same talent. Knowledge is extremely valuable when it comes to AI/ML.
Google learned this the hard way when it let Noam Shazeer leave. When they realised how valuable he was, they ended up paying $2.7 billion to bring him back.
CalChris|6 months ago
My question is what happened to the $2.4B? Apparently very little of it made its way to the Windsurf employees, as #2 tweeted last week. It wasn't an acquisition although Cognition was. Cognition bought a company for $250M that just got a check for $2.4B. How exactly did this work?
jampa|6 months ago
We don't know what deal they made with the VCs, but they could have multiple liquidation preference agreements.
> A liquidation preference multiple (e.g., 1x, 2x) determines how much investors receive before any distribution to common shareholders. A 2x preference means investors are entitled to twice their initial investment amount before others receive payouts.
cnst|6 months ago
Isn't this an admission that you cannot get rich by getting a job at a hot private early-stage startup? Even if you're the employee #2?
That you'd be far more likely to get rich by getting a job at Google / Meta / Amazon, getting rich through RSU time-of-award to time-of-disposition growth, then doing private investing in a company like Windsurf, then getting even richer as an investor, all actual employees creating value be damned?
eddythompson80|6 months ago
Paying debitors and investors?
Jenk|6 months ago
_Huge_ payday if true.
krat0sprakhar|6 months ago
Exactly! That definitely means that the $82M ARR business and the tech behind it is definitely valuable to Google
eddythompson80|6 months ago
The big players (Google, Microsoft, Meta, Nvidia) don't want ai startups failing. In fact they are terrified of that. Can you imagine the market shock if windsurf just went under in 1 year. How fearful all investors would be? How the whole market is gonna react? We are told that AI is basically a money printer. If you release a product for $20/month and a couple of months later other companies (with much better margins by definition) release competitor for $250 then $300 then $400 something is clearly not adding up even among the higher numbers.
jillesvangurp|6 months ago
Mostly when you read about a big company buying a small startup, it's actually an investor bail out. The company has technically failed and the investors basically want to get rid of the failing company in a way that doesn't make them look like muppets. So there's a nice press release, an undisclosed share swap, and tada another successful exit .. of a company and technology that you will never hear from again. This is nothing new. This is what happens to most startups that don't IPO.
Codium was alright a few years ago but by now it's a commodity. Amazing idea of having a little side bar in VS code with a bare bones chat UI that you could hookup to your openAI API key. They build bits and pieces of tech with some merit to it since then of course. But nothing that cannot and is not being replicated by others. Same with Cursor, windsurf and all the other niche players in this market. None of these companies has much of a moat.
And at this point all the big companies have their in house built solutions: Claude Code, Google has Julius, OpenAI has codex, MS has co-pilot, AWS recently launched their own thing. Clearly building these things is not that hard. All the IP is in the models and infrastructure.
yard2010|6 months ago
pimeys|6 months ago
reilly3000|6 months ago
AIorNot|6 months ago
https://youtu.be/r-GFmH0EK9Y?si=8kWjzP1YdWVp6oAp
pnvdr|6 months ago
BenGosub|6 months ago
In such a case, I think we will see a move to smaller, domain specific models. I think if the first cycle of the AI age is large, general models, the second will be smaller, domain specific ones that we can run on retail machines.
flufluflufluffy|6 months ago
diggan|6 months ago
I guess replacing some bytes of text with 30KB of PNG is what happens when the platform you've chosen to use doesn't support the formatting you actually want.
claw-el|6 months ago
If the answer is no for the whole ecosystem, it’s going to be much harder to see acquisition of companies like this.
p0w3n3d|6 months ago
Hmmm... I'm just saying things that are loosely related
smokel|6 months ago
That may be true (although I doubt the numbers add up). But what is keeping those researchers from walking away, or underperform whenever they feel like it? Giving them a lot of money surely isn't going to motivate them to work harder.
It's probably giving them access to one of the world's largest clusters of compute that lures them in.
trashtensor|6 months ago
isnt that the reason we give ceos lots of money?
IshKebab|6 months ago
djoldman|6 months ago
It makes sense that the answer is no.
jbentley1|6 months ago
https://github.com/stravu/crystal/
apwell23|6 months ago
launching multiple claudes in gitworktrees is not that hard. i have like 25 line bash function that does all that stuff in your project without nasty electron stuff.
jeffWrld|6 months ago
[deleted]
jasonsb|6 months ago