Days after AI coding startup Windsurf announced that it’s being acquired by Cognition, Windsurf startup Jeff Wang took to X to offer more details about the drama and uncertainty around the deal.
Windsurf was previously reported to be in acquisition talks with OpenAI, but that deal fell apart, with Google DeepMind instead hiring the startup’s CEO Varun Mohan, co-founder Douglas Chen, and some of its top researchers. Google would reportedly license Windsurf’s technology as part of the $2.4 billion deal — but not take an equity stake in the company.
This looked like the latest in the trend of “reverse acquihires,” in which large tech companies seek to avoid antitrust scrutiny by hiring key startup team members and licensing their technology, rather than acquiring startups outright.
But what happens to the startups and the employees who get left behind? As we discussed on the latest episode of Equity, one startup founder compared the departing Windsurf executives to a captain abandoning his crew aboard a sinking ship.
Wang, who had been Windsurf’s head of business, became the company’s interim CEO after Mohan’s departure. In his post on X, he offered some sympathy to Mohan and Chen, who he described as “ great founders” in a situation that “must have been difficult for them as well.”
Still, Wang recounted an all-hands meeting on Friday, June 11, where most team members were expecting to hear about the OpenAI acquisition. Instead, he had to share the news about the Google deal and resulting departures.
“The mood was very bleak,” Wang said. “Some people were upset about financial outcomes or colleagues leaving, while others were worried about the future. A few were in tears, and the Q&A had been understandably hostile.”
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In Wang’s view, although the company “had lost some great people and taken a serious blow to morale,” it still had “all of our IP, product, and strong talent including an excellent [go-to-market] machine.” So Windsurf could still try to raise more money, sell, or just keep going.
That evening, however, Wang heard from Cognition executives Scott Wu and Russell Kaplan, and he said Windsurf leadership “took the Cognition approach very seriously from the start and launched right into negotiations.” In his telling, what followed was a frantic weekend of discussions with Cognition, while considering inbound interest from other potential acquirers and meeting with Windsurf’s remaining engineers to convince them not to leave. (And as all that was happening, “the timeline was exploding with memes and commentary.”)
The two companies were a good fit, Wang argued, in part because of complementary teams.
“While they had overinvested in engineering, they had frankly underinvested in GTM and Marketing, and our teams in those functions are nothing short of world class,” he said. “On the other hand, we now were missing a Core Engineering team, and there’s no better group of AI engineers than the lineup Cognition has assembled.”
Plus, Wang said he and Wu (pictured together above) were aligned on the need to “take care of all Windsurf employees.”
“That resulted in a key part of the deal: structuring it to give a payout to every employee, to waive all cliffs, and to accelerate all vesting for Windsurf equity,” he said.
The acquisition agreement was apparently signed at 9:30am on Monday morning, announced to the team shortly afterwards at another all-hands, then announced to the public shortly after that.
In an interview with Bloomberg, Wang described that Friday all-hands as “probably the worst day of 250 people’s lives,” followed Monday by “probably the best day.”