Windsurf CEO Reveals Desperate Weekend Before Cognition Deal Saves Startup

Windsurf, an AI coding startup, recently faced a whirlwind of events that saw a high-profile deal fall apart and a new acquisition come together in just a few days. Initially, the company was in talks to be acquired by OpenAI in a $3 billion deal. However, this arrangement fell through, leading to significant不确定性 and anxiety among Windsurf’s 250 employees. Instead of an acquisition, Google stepped in, hiring the company's CEO Varun Mohan, co-founder Douglas Chen, and several top researchers. This move came with a $2.4 billion licensing deal for Windsurf’s technology, but without taking an equity stake in the company. This type of deal, known as a "reverse acquihire," is becoming increasingly common as large tech firms aim to sidestep antitrust issues by licensing technology and poaching talent rather than acquiring entire startups. The sudden turn of events was deeply distressing for Windsurf's team. During an all-hands meeting on Friday, June 11, the news of the Google hiring and the dissolution of the OpenAI deal was met with shock, disbelief, and emotional reactions. Many employees felt betrayed and uncertain about their future, with some even in tears. To compound the situation, the company lost its primary engineering talent, leading to a significant blow to morale. Amid this turmoil, Jeff Wang, former head of business, became the interim CEO. He addressed the team, outlining potential paths forward: raising more capital, selling the company, distributing remaining funds, or continuing operations. Wang emphasized the company's resilience, citing its strong intellectual property, product, and marketing capabilities as reasons to remain optimistic. However, the challenge of maintaining the team's trust and enthusiasm was immense. On the same day, an unexpected opportunity arose. Scott Wu, cofounder of Cognition, and Russell Kaplan, its president, contacted Wang and expressed interest in what was left of Windsurf. Cognition, a $4 billion-valued startup that develops the AI coding agent Devin, saw potential in integrating Windsurf’s product and talent. The discussions began almost immediately, with both parties keen to resolve the deal swiftly. Wang and his team spent the weekend in intense negotiations. They involved legal counsel and explored various terms, ensuring that the deal would prioritize the remaining Windsurf employees. Key aspects included financial compensation for all employees, waived cliffs, and accelerated equity vesting. These provisions aimed to mitigate the impact of the Google poaching and restore confidence in the company's future. By Monday morning, just over 24 hours after the initial contact, the deal was finalized and announced to the Windsurf team. The reaction was overwhelmingly positive, with Wang describing it as "probably the best day" for the employees after the Friday meeting’s “worst day.” The applause at the announcement lasted for an extended period, and Wang himself was nearly moved to tears by the team's renewed sense of hope and unity. Windsurf's integration into Cognition is seen as a strategic move that leverages the strengths of both companies. While Cognition excels in engineering, Windsurf brings robust go-to-market and marketing expertise. The combined product is expected to offer enhanced features, with Devin benefiting from Windsurf’s foreground synchronous agent and Windsurf gaining a remote asynchronous agent from Cognition. Industry experts have lauded the deal's speed and structure. According to Bloomberg, one lawyer involved called it "one of the fastest" acquisitions they had ever seen. The unique terms, particularly the emphasis on employee welfare, have been highlighted as a model for how tech companies can navigate complex and often contentious transitions. Cognition’s valuation and strong market position suggest that the acquisition will likely bolster its competitiveness in the rapidly evolving AI landscape. Both Wang and Wu are confident that the merged entity will drive innovation and advance the field of AI coding assistants. Wang’s leadership during the tumultuous weekend and his commitment to the remaining Windsurf employees demonstrate his ability to manage crisis and foster a cohesive team. Cognition, with its impressive track record and recent funding, is poised to make significant strides with the addition of Windsurf’s assets and talent. In summary, the rapid shift from a near-failed acquisition by OpenAI to a successful deal with Cognition showcases the volatile and fast-paced nature of the AI startup ecosystem. It also highlights the importance of flexible and employee-focused strategies in navigating such transitions. Despite the initial setbacks, Windsurf’s remaining team and IP represent valuable assets that Cognition aims to leverage for future growth and innovation.