Google acquires Windsurf licence after OpenAI deal fails

[NEW YORK] Alphabet’s Google struck a deal to acquire top talent and licensing rights from artificial intelligence (AI) coding startup Windsurf, following the collapse of Windsurf’s agreement to be bought by Google rival OpenAI, according to people familiar with the matter.

Google will not take a stake in the company, Google said. Windsurf had previously agreed to be purchased by OpenAI for US$3 billion, but the deal fell apart in part because of tension with Microsoft, a major OpenAI investor, other people said, declining to be named discussing private deliberations.

OpenAI did not want Microsoft be able to use Windsurf’s intellectual property, according to a person familiar with the matter. That was one of several sticking points in the two companies’ talks about OpenAI’s effort to restructure into a commercial entity. Microsoft’s existing agreement with OpenAI says it is entitled to access the startup’s technology.

Google said on Friday (Jul 11) that the company is hiring Windsurf chief executive officer Varun Mohan and co-founder Douglas Chen, along with a small group of staff, to work at its DeepMind AI unit. An OpenAI spokesperson confirmed that the exclusivity period for its acquisition offer had lapsed, leaving Windsurf free to consider other bids. 

Windsurf, formally called Exafunction, is part of a crop of startups building AI-driven coding assistants – systems capable of tasks such as writing code based on natural language prompting. Founded in 2021, Windsurf has raised more than US$200 million in venture capital funding, according to PitchBook data. Other investors include Greenoaks Capital Partners and AIX Ventures.

Bloomberg News reported in April that OpenAI was in talks to buy Windsurf. BLOOMBERG