OpenAI’s $3 billion deal with Windsurf falls apart, Google poaches Windsurf’s CEO

OpenAI’s deal to buy coding startup Windsurf fell apart, with Google now stepping in to hire the startup’s CEO and some of its top researchers.

The deal between Google and Windsurf became public on Friday and is a vivid example of companies actively competing for AI talent.

Google will have Windsurf CEO Varun Mohan, cofounder Douglas Chen, and some of Windsurf’s R&D employees join its Google DeepMind team. Effective immediately, Jeff Wang, Windsurf’s Head of Business, has stepped into the role of interim CEO, while Graham Moreno, Windsurf’s VP of Global Sales, has stepped into the role of President. Most of Windsurf’s 250-person team will remain with the company.

At Windsurf, we have always believed that there is a unique opportunity to channel AI to accelerate the core human desire of translating ideas into reality. Whether we’re helping an individual or an organization, Windsurf’s mission has always been to enable our customers to dream…

undefined Jeff Wang (@jeffwsurf) July 11, 2025

Bloomberg reports that Google will pay about $2.4 billion for Windsurf’s top talent and licensing rights.

Big welcome to @_mohansolo and others from the Windsurf team joining Deepmind : )

undefined Logan Kilpatrick (@OfficialLoganK) July 11, 2025

Although Google didn’t comment on the financial terms, it said that the deal doesn’t include a stake in Windsurf. The company will take a non-exclusive license to some of the startup’s technology — however, it will not hold any control over Windsurf.

Windsurf had previously agreed to a deal to be acquired by OpenAI for $3 billion, in a move that would help OpenAI significantly expand its customer base and its offerings. However, the deal fell apart because Windsurf didn’t want Microsoft, a major OpenAI investor, to have access to its AI coding technology.

Microsoft’s existing agreement with OpenAI grants it access to intellectual property around technology as part of any acquisition. OpenAI asked for an exception, which would allow it to keep data related to Windsurf private, but Microsoft declined the request, The New York Times reports.

Microsoft has reportedly previously given such exceptions, such as in the case of the acquisition of a hardware device start-up founded by Jony Ive. This was because the company didn't want to enter the hardware consumer device business, according to The New York Times.

However, since Windsurf creates AI-powered coding software, Microsoft directly competes with it with Copilot.

The exclusivity period for the $3 billion acquisition deal with Windsurf has expired, leaving the company open to explore other opportunities.

Windsurf, which describes itself as “the future of software development”, has gained extreme popularity on the market, valued at $1.25 billion in August, only four years after launch.