In a dramatic turn of events, OpenAI’s high-profile attempt to acquire AI coding startup Windsurf for $3 billion has officially unraveled. The fallout? Google DeepMind has swooped in, hiring Windsurf’s CEO Varun Mohan, co-founder Douglas Chen, and several top researchers — all without acquiring the company.
⚙️ Google’s $2.4 Billion Power Move: Talent & Tech Without Acquisition
Rather than buying the startup outright, Google is paying $2.4 billion for a non-exclusive license to Windsurf’s cutting-edge technology while hiring its leadership. This strategic move, dubbed a “reverse-acquihire,” allows Google to avoid regulatory scrutiny while gaining powerful AI coding capabilities.
“We’re excited to welcome some top AI coding talent from Windsurf’s team to Google DeepMind to advance our work in agentic coding,” said Google spokesperson Chris Pappas.
🧠 What Is Windsurf? And Why Is Everyone Fighting Over It?
Windsurf has quickly become a rising star in the AI coding space, with its annual recurring revenue (ARR) jumping from $40M to $100M in just months. The startup’s tools are widely adopted by enterprise software teams looking to accelerate development using advanced AI.
OpenAI, impressed by this growth, had entered exclusive talks to buy Windsurf. However, complications arose when Microsoft — OpenAI’s largest investor — reportedly objected to the acquisition, fearing it wouldn’t get access to Windsurf’s valuable IP.
🤝 Microsoft Reportedly Blocked the Deal: Here’s Why
Under OpenAI’s current contract, Microsoft has access to all OpenAI IP. But Windsurf didn’t want Microsoft getting access to its proprietary technology — a key sticking point. This disagreement ultimately led to the expiration of the exclusivity period, and Windsurf quickly pivoted to strike a deal with Google.
🚀 What Happens to Windsurf Now?
Despite losing its founding leadership, Windsurf isn’t shutting down. The remaining 250-person team will continue developing and selling its AI coding tools to enterprise clients. Jeff Wang, formerly head of business, is stepping in as interim CEO.
Still, history shows this kind of split can cause disruption. Similar scenarios have led to slowdowns for other AI startups like Scale AI and Inflection, who lost key executives to Big Tech.
🔍 What This Means for the Future of AI Coding
This move signals a new wave in the AI race: Big Tech isn’t just building in-house anymore — they’re buying talent and tech strategically to avoid antitrust pushback. As AI coding becomes a central battleground, companies like Google, OpenAI, Microsoft, and Anthropic are all investing heavily to win over developers.
Google’s move to hire Windsurf’s top talent is expected to accelerate the development of more agentic coding tools, enhancing its AI capabilities for developers. At the same time, Windsurf, now independent, is free to explore new licensing deals with other tech companies, potentially expanding its reach across the AI landscape. This shift intensifies the competition in the growing market for developer-first AI tools, where offerings like Claude Code, OpenAI’s Codex, and now Windsurf’s tech stack are vying to become essential tools for software engineers.