TL;DR: Windsurf (formerly Codeium) was this close to a $3B acquisition by OpenAI. But when OpenAI walked, spooked by Microsoft entanglements, Google reverse-acquihired the founding team, and Cognition swooped in 72 hours later to buy the actual product and team. What looked like a straight-forward exit became a cautionary tale in founder deals, strategic timing, and AI land grabs. Buckle up… this is how Big Tech and fast startups play chess in public.
The Rise: From Dev Tool to AI Darling
Let’s rewind.
Windsurf had a hell of a run. In under a year, it went from “just another AI coding tool” to pulling $100M in ARR. The product was sticky, enterprise-ready, and growing fast. Hundreds of dev teams signed on. Investors and acquirers started circling.
By Q2 2025, Windsurf looked like it was headed for a fairytale ending: OpenAI, with ChatGPT and Codex already under its belt, was reportedly ready to shell out $3B. Term sheets were flying. The industry had basically stamped the deal as “done.”
But if you’ve been in this game long enough you know better.
OpenAI Bails, Microsoft Looms
When the deal’s exclusivity window quietly expired on July 11, no one wanted to believe what was happening. But the silence was the tell.
OpenAI walked away.
Why? Because acquiring Windsurf would’ve stirred the regulatory pot and potentially torpedoed their already-complicated relationship with Microsoft. Remember: Microsoft has a multi-billion dollar stake in OpenAI and uses its models across Azure and Copilot.
Buying a top-tier AI IDE startup that might compete with or integrate into Microsoft's stack? That’s not just awkward it’s potentially deal-breaking.
So OpenAI didn’t flinch… they folded. Strategically.
Lesson #1: Saying no to a good deal is how you stay alive for the great one.
Google’s Reverse-Acquihire Masterclass
Before the industry had time to refresh their feeds, Google made their move.
Rather than acquire Windsurf, DeepMind pulled a move:
- Paid $2.4B to license Windsurf’s core tech (not own it)
- Poached CEO Varun Mohan, co-founder Douglas Chen, and the top R&D talent
- Left behind the actual company, employees, enterprise contracts, and product
This is what a reverse-acquihire looks like: strip the brains, rent the tech, and leave the legal baggage behind.
Windsurf was now missing its leadership, with 250 employees wondering what just happened. What should’ve been a billion-dollar exit suddenly looked like a ghost ship.
Lesson #2: If your startup’s value is tied to its founders, you better plan for what happens when they leave.
Cognition Pounces in 72 Hours
While most of tech Twitter was still reacting to the Google drama, Cognition, creators of the AI agent Devin, was already dialing in.
They didn’t overthink it. They saw:
- A fully built, AI-native IDE
- $82M ARR
- 350+ paying enterprise customers
- A team that hadn’t defected
- Access to Claude models (restored after OpenAI talks fell through)
First call: Friday 5PM
Signed agreement: Monday morning
Three days. No press leaks. Just execution.
Lesson #3: Great competitive intelligence isn’t just tracking… it’s acting fast when the market blinks.
What Cognition Actually Bought
Cognition didn’t buy a broken startup. They bought:
- A working AI coding environment with enterprise traction
- A technical team still hungry and intact
- Distribution that takes years to build
- Strategic leverage in the full-stack AI race
Remember, Cognition already had Devin, arguably the first end-to-end autonomous AI agent for software development. Now they own the workspace it lives in.
They now control the agent and the IDE it works inside. That's how you build a moat in 2025.
The Strategic Debrief
Let’s break this down like an engineer-turned-founder would.
🔒 Deal Discipline: OpenAI’s Play
They bailed for strategic reasons, not weakness. Avoiding regulatory exposure, protecting Microsoft ties, and conserving focus for bigger bets? That’s senior-level thinking.
🎭 Acquihire Theater: Google’s Play
Google got the R&D it wanted without the mess of an acquisition. This is how Big Tech preserves optionality. Is it ruthless? Sure. Effective? Absolutely.
🎯 Market Timing: Cognition’s Play
Cognition didn’t “get lucky.” They were watching the field, understood the chessboard, and capitalized when others hesitated. Real founder energy.
What Happens Now?
Cognition just went from “interesting agent startup” to a serious contender in enterprise AI tooling.
Meanwhile:
- Google owns the tech DNA — not the customers
- OpenAI walks away without drama — but also without a dev IDE
- Windsurf is reborn — now backed by a team that actually ships fast
The board just got reshuffled. Cognition has the product, the pipeline, and the talent to make real noise. Google’s betting on brains over brand. OpenAI’s playing the long game with its political capital intact. And Windsurf? It’s got a second wind and something to prove. In a market where velocity beats legacy, the next few months won’t just decide who builds the best dev tools, they’ll reveal who actually understands the game they’re playing.