OpenAI’s deal to acquire the viral AI coding startup Windsurf for $3 billion fell apart on Friday, according to The Verge.
In a shocking twist, Google DeepMind is now hiring Windsurf CEO Varun Mohan, co-founder Douglas Chen, and some of the startup’s top AI coding talent. A Google spokesperson confirmed the hiring of Windsurf’s leaders in a statement to TechCrunch.
“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 in an email to TechCrunch.
Notably, Google is not taking a stake in Windsurf and will not have any control over the company. However, as part of the deal, Google will have a nonexclusive license to certain Windsurf technology, though the AI coding startup remains free to license its technology to others.
The deal represents the AI ecosystem’s latest reverse-acquihire, in which a company hires a startup’s top talent and licenses its technology but does not outright acquire the company. Google previously conducted a similar deal to hire back Character.AI CEO Noam Shazeer, as did Microsoft to hire Mustafa Suleyman. These deals have helped several big tech companies increase their position in the AI race without drawing regulatory scrutiny.
“We are excited to be joining Google DeepMind along with some of the Windsurf team,” said Mohan and Chen in a statement to TechCrunch. “We are proud of what Windsurf has built over the last four years and are excited to see it move forward with their world class team and kick-start the next phase.”
As of Friday, Windsurf’s head of business, Jeff Wang, will take over as the startup’s interim CEO, he announced in a post on social media. Most of Windsurf’s 250 person team is not headed to Google DeepMind and will continue offering its AI coding tools for enterprise customers.
OpenAI’s deal to acquire Windsurf has reportedly been a major tension point in the ChatGPT-maker’s contract renegotiations with Microsoft. Microsoft currently has access to all of OpenAI’s intellectual property, however, OpenAI didn’t want its largest backer to get Windsurf’s AI coding technology as well, according to previous reporting from the Wall Street Journal.
Earlier on Friday, Fortune reported that the exclusivity period on OpenAI’s offer to acquire Windsurf had expired, meaning that Windsurf would now be free to explore other offers. It seems that Windsurf didn’t wait long.
In recent months, Windsurf has been one of the hottest AI coding startups on the market. In April, the startup’s ARR reached about $100 million, TechCrunch previous reported, up from about $40 million months earlier. That rapid growth attracted suitors such as OpenAI, and apparently Google.
The addition of Mohan, Chen, and other Windsurf leaders could significantly boost Google’s ability to build AI coding tools. In recent months, AI model providers have focused more on offering AI coding applications to entice developers. Anthropic has boosted its revenue significantly on the back of its AI coding tool, Claude Code, while OpenAI continues to pitch Codex, its AI coding agent, to software engineers.
Windsurf, on the other hand, is left in a much more uncertain position as a result of this deal. Other AI startups that have been reverse-acquihired have struggled to sustain the same momentum they had beforehand. Scale AI lost customers as a result of its deal with Meta, whereas Inflection had to pivot entirely from consumer AI after its deal with Microsft.
It seems likely that Windsurf could suffer a similar fate.