Google Swoops in to Make a $2.4 Billion Deal With a Startup Previously Promised to OpenAI

OpenAI's $3 billion deal to acquire the AI coding startup Windsurf fell apart — so Windsurf turned to OpenAI competitor Google instead.

Bloomberg reported last week that after Windsurf's deal with OpenAI crumbled, Google stepped in and struck a deal with the AI coding startup to pay around $2.4 billion for talent and licensing rights.

Google is not investing in Windsurf, but is rather paying to hire the startup's CEO Varun Mohan, co-founder Douglas Chen, and a small group of other senior Windsurf staffers to work on Google's DeepMind AI team. Most of Windsurf's 250 employees will stay with the startup and focus on creating innovations for its business clients.

"We're excited to welcome some top AI coding talent from Windsurf's team to Google DeepMind to advance our work in agentic coding," Google said in a statement, per Reuters.

Related: How a Love of Chess Led the CEO of Google's DeepMind to a Career in AI — and a Nobel Prize

Google will also have a nonexclusive license to use Windsurf's technology, meaning that Windsurf can license its platform to other companies.

^{Google CEO Sundar Pichai. Photo by Jakub Porzycki/NurPhoto via Getty Images}

Windsurf's deal with Google arrives months after the AI coding startup was reported to be in talks with Google rival OpenAI for a $3 billion acquisition. Bloomberg reported that the deal collapsed because Windsurf wanted to prohibit major OpenAI investor Microsoft from accessing its intellectual property.

Windsurf and OpenAI had entered into an exclusivity period for the acquisition offer, which ended as of Friday, OpenAI told Bloomberg. Windsurf is now able to consider other bids.

Windsurf, previously known as Codeium, offers AI coding tools like Cascade, an AI agent that codes, corrects, and thinks multiple steps ahead. According to PitchBook data, the startup was founded in 2021 and is based in Mountain View, California. Windsurf announced in April 2024 that it had over 500,000 active users and over 500 paying enterprise clients.

OpenAI, meanwhile, was founded in 2015 and came out with ChatGPT in November 2022. The startup closed a $40 billion fundraising round in March at a $300 billion valuation, the biggest tech funding round on record from a private company. ChatGPT now has 500 million global weekly users, OpenAI disclosed in March.

Related: Saying 'Please' and 'Thank You' to ChatGPT Costs OpenAI 'Tens of Millions of Dollars'

Google's decision to hire new AI talent arrives as Meta poaches former staff members for its superintelligence team. Former Google DeepMind researchers Jack Rae and Pei Sun joined Meta last month to help the company work towards superintelligence, or AI that surpasses human capabilities.

Meta isn't just poaching from Google. OpenAI CEO Sam Altman, 40, stated last month that Meta was trying to poach OpenAI staff with "giant" $100 million signing bonuses and "more than that" in compensation per year, a statement that Meta executives later refuted.

Shares of Google's parent company, Alphabet, were down about 5% year-to-date. Alphabet is the fifth-largest company in the world, with a market value of $2.2 trillion.