OpenAI’s attempt to buy Windsurf has ended, and Google DeepMind is moving quickly to bring some of the AI coding startup’s key people into its own organization.
The shift leaves Windsurf independent, but changed. Its CEO Varun Mohan, co-founder Douglas Chen, and some of its top researchers are heading to Google DeepMind, while the rest of the company will continue selling AI coding tools to enterprise customers.
The OpenAI deal is off
OpenAI’s deal to acquire Windsurf for $3 billion fell apart on Friday, according to The Verge. The development ends what had been one of the most closely watched potential deals in the AI coding market.
The collapse came after Fortune reported earlier on Friday that the exclusivity period on OpenAI’s offer to acquire Windsurf had expired. That meant Windsurf was free to consider other offers. Based on what followed, the company did not wait long before moving in another direction.
The proposed acquisition had also reportedly created tension in OpenAI’s contract renegotiations with Microsoft. Microsoft currently has access to all of OpenAI’s intellectual property, but OpenAI did not want its largest backer to also receive Windsurf’s AI coding technology, according to previous reporting from the Wall Street Journal.
That tension matters because Windsurf was not just another small AI startup. In recent months, it had become one of the most prominent companies in AI coding. TechCrunch previously reported that its ARR reached about $100 million in April, up from about $40 million months earlier.
Google gets talent and technology, not control
Google DeepMind is hiring Varun Mohan, Douglas Chen, and some of Windsurf’s top researchers. A Google spokesperson confirmed the hiring to TechCrunch.
Google is not taking a stake in Windsurf and will not control the company. Instead, the arrangement gives Google a nonexclusive license to certain Windsurf technology. That structure means Windsurf remains able to license its technology to other companies.
Bloomberg reports that Google is paying $2.4 billion to license Windsurf’s technology and hire its top employees. The result is not a standard acquisition, but it still gives Google DeepMind access to valuable AI coding talent and technology.
Google spokesperson Chris Pappas told TechCrunch: “We’re excited to welcome some top AI coding talent from Windsurf’s team to Google DeepMind to advance our work in agentic coding,”
Mohan and Chen also gave a statement to TechCrunch: “We are excited to be joining Google DeepMind along with some of the Windsurf team,” and “We are proud of what Windsurf has built over the last four years and are excited to see it move forward with their world class team and kick-start the next phase.”
A reverse-acquihire in the AI race
The Windsurf arrangement fits a pattern that has become more visible across the AI industry: a large technology company hires a startup’s leading people and licenses technology, without buying the company outright.
TechCrunch describes this as a reverse-acquihire. In this case, Google gains some of Windsurf’s most important leaders and researchers, while Windsurf continues as a separate company.
The source article notes that Google previously made a similar move to hire back Character.AI CEO Noam Shazeer. Microsoft also made a similar move to hire Mustafa Suleyman.
These arrangements have helped Big Tech companies strengthen their position in AI without taking the more direct route of acquiring a startup. The article also notes that such deals can avoid drawing regulatory scrutiny.
For Google DeepMind, the practical benefit is clear. AI model providers have recently placed more emphasis on AI coding applications as a way to attract developers. Anthropic has grown revenue significantly with Claude Code, while OpenAI continues to pitch Codex, its AI coding agent, to software engineers.
What changes inside Windsurf
Windsurf is not disappearing. As of Friday, head of business Jeff Wang will become interim CEO, according to a social media post he announced.
Most of Windsurf’s 250 person team is not going to Google DeepMind. Those employees will continue working on the company’s AI coding tools for enterprise customers.
Still, the company faces a more uncertain future. Losing a CEO, co-founder, and some top researchers can reshape how a startup operates, even when the legal structure remains intact.
The source article points to other AI startups that struggled after similar talent-focused deals. Scale AI lost customers after its deal with Meta, while Inflection had to pivot entirely from consumer AI after its deal with Microsoft.
That does not mean Windsurf’s outcome is already settled. But the risk is obvious: the company must keep serving enterprise customers and licensing its technology while operating without some of the people most closely tied to its recent momentum.
Why AI coding is drawing so much attention
The deal also shows how competitive AI coding has become. Windsurf’s fast growth made it attractive to both OpenAI and Google, and the broader market has pushed major AI companies to build tools aimed directly at software engineers.
For developers and enterprise buyers, the immediate picture is mixed. Windsurf says most of its team will continue offering its AI coding tools. Google DeepMind, meanwhile, adds experienced AI coding talent to its work on agentic coding.
The larger story is that AI companies are fighting for both products and people. In Windsurf’s case, the acquisition path ended, but the competition for its technology and leadership did not.