The deal is valued at $2.4 billion, and Google will not take a stake in the startup.

Google logo outside its research facility

 Google acquires Windsurf's top executives in multi-billion dollar deal despite OpenAI interest

Alphabet Inc.'s Google has hired several key employees from Windsurf, a startup specializing in artificial intelligence (AI) code generation, in a surprise move following rival OpenAI's attempt to acquire the startup.

A source familiar with the deal told Reuters that Google will pay $2.4 billion in licensing fees under the deal to use some of Windsurf's technology on non-exclusive terms, adding that Google will not take any equity in the startup. Windsurf CEO Varun Mohan, co-founder Douglas Chen, and some members of the programming tool's research and development team will join Google's DeepMind AI division.

Sources familiar with the matter told Reuters in June that the deal came after months of discussions between Windserve and OpenAI about selling itself in a deal that could be valued at up to $3 billion, highlighting interest in the field of code generation, which has emerged as one of the fastest-growing applications of artificial intelligence. The former Windserve team will focus on DeepMind's AI agent-based programming initiatives and will work primarily on Project Gemini.

The unusual deal structure represents a win for Windserve investors, who have raised $243 million from investors including Kleiner Perkins, Greenoaks, and General Catalyst. The company was last valued at $1.25 billion a year ago, according to data firm PitchBook. Sources said Windserve investors will receive cash through licensing fees and will retain their stake in the company.

Acquisition Hires

This surprise move by Google mimics its August 2024 deal, in which it hired key employees from chatbot startup Character.AI. Similarly, major tech companies, including Microsoft, Amazon, and Meta, have rushed to engage in so-called “acquisition hires,” which some have criticized as an attempt to evade regulatory scrutiny.

Acquisition hires are deals in which a company acquires or invests in a smaller company to acquire its employees, not its products or services. This process is used to quickly gain access to a skilled team or talent pool that can contribute to the acquiring company’s growth.

Microsoft struck a $650 million deal with Inflection AI in March 2024 to use the AI startup’s models and hire its team, while Amazon hired the co-founders of AI startup Adept and some of its team last June. Meta acquired a 49% stake in Scale AI in June, the largest test yet of this growing form of business partnerships.

Unlike regular acquisitions that would give the buyer a controlling stake, these deals do not require review by U.S. antitrust authorities. However, they can scrutinize the deal if they deem it structured to avoid those requirements or harm competition. Since then, several deals have become the subject of regulatory investigations.

This development comes as tech giants, including Alphabet and Meta, are frantically racing to secure high-profile deals and offer multi-million-dollar salaries to attract top talent in the race to lead the next wave of AI technologies. The majority of Windserv's approximately 250 employees will remain with the company, which has announced plans to prioritize innovation for its enterprise clients.