SUMM

Windsurf, originally expected to be acquired by OpenAI for $3 billion, ended up with its CEO and some staff joining Google, not through an acquisition, but via a hiring and licensing deal
Windsurf as a company still exists and is not part of Google; remaining staff will pivot to focus on enterprise tools
The OpenAI deal failed, leading to significant changes for employees, founders, and investors who expected a big payout

Scale AI had a similar "non-acquisition" with Meta, where Meta invested $14.3 billion for 49%, bringing Scale’s CEO over and allowing early employees/investors to cash out
The current AI landscape is seeing aggressive "poaching season"—top AI talent is being lured away with huge compensation packages
Companies are willing to pay large sums and offer equity to lure AI researchers and engineers, as advanced AI talent is rare and hard to cultivate

Early startup equity typically isn’t “real” until an event like an acquisition or IPO lets holders cash out
Acquisitions by private companies (like OpenAI) often pay with stock, not cash, and that stock can’t be easily sold until OpenAI itself has a liquidity event
Investors and employees often count on these deals for a major financial windfall; sometimes loans can be taken out against private company stock

Microsoft’s agreement with OpenAI meant any IP acquired by OpenAI—like Windsurf’s tech—would automatically be accessible to Microsoft
This setup made an OpenAI acquisition unattractive, as Microsoft (which owns VS Code) would receive the benefits for free, removing OpenAI’s incentive
Negotiation likely stalled for months before this was confirmed, derailing expectations for Windsurf employees/investors who had anticipated payouts

Google benefits from acquiring Windsurf’s talent and technology to improve its developer-facing AI tools, especially as they lag behind leaders like Anthropic in some areas
Google was wary of making a full acquisition due to antitrust risks and Windsurf’s waning market position; instead, Google hired key staff and licensed the tech
This leaves Windsurf’s core business with the remaining team, focusing on enterprise clients
Reports say Google paid about $2.4 billion for staff, IP, and licenses, not equity

Google is not acquiring Windsurf’s company or equity—just paying for licenses and hiring key people
Investors, founders, and employees at Windsurf will receive cash from the licensing deal, effectively as a compensation prize since their equity is now worth much less with the talent and IP gone
The payout helps avoid potential investor lawsuits and provides closure despite the company’s plummeting valuation post-deal

Windsurf is splitting its focus: the technology and much of its talent join Google, while the remaining business (now likely called Kodium again) will serve enterprises
Kodium’s continued focus is on enterprise-grade tools and integration with platforms like JetBrains, aligning with demands of more established, less trendy development teams
The non-enterprise developer market (more beginner and growth-oriented users) is being ceded to Google and others

Google gains a significant step up in developer tooling through acquiring Windsurf’s tech and staff
Windsurf's IDE is likely to be discontinued in favor of Google’s offerings
Remaining Windsurf/Kodium will serve enterprise customers, possibly becoming profitable but now much smaller in market and ambition
Investors and early stakeholders receive enough compensation through the deal to prevent major conflict or lawsuits
The whole episode illustrates the volatility and complexity of high-stakes AI/tech acquisitions and the intense competition for AI talent

The Windsurf situation is pretty wild (RIP $3 billion?)