OpenAI left behind as Windsurf’s stars defect to Google DeepMind

OpenAI’s $3 billion bid to acquire AI coding startup Windsurf has officially collapsed after the exclusivity period expired, as confirmed by The Verge and TechCrunch.

In a dramatic shift, Google DeepMind has hired Windsurf CEO Varun Mohan, co-founder Douglas Chen, and several key engineers, strengthening its position in agentic coding development.

Google confirmed the high-profile hires, stating, “We’re excited to welcome some top AI coding talent from Windsurf’s team to Google DeepMind to advance our work in agentic coding,” said spokesperson Chris Pappas. While Google won’t gain ownership of Windsurf, it has secured a non-exclusive license to some of the company’s technology, allowing Windsurf to retain operational independence and license its innovations elsewhere.

The move resembles a growing trend of “reverse-acquihires,” where major tech firms absorb top talent and IP rights without acquiring entire companies—similar to Microsoft’s deal with Mustafa Suleyman and Google’s prior arrangement with Character.AI’s Noam Shazeer.

Windsurf, which hit a $100 million ARR in April 2025, had attracted major suitors due to its rapid growth. OpenAI’s failed acquisition reportedly created internal friction with Microsoft, its largest backer, which already holds access to OpenAI’s IP and did not want additional crossover with Windsurf’s technology.

Following the leadership exits, Windsurf’s head of business Jeff Wang has stepped in as interim CEO. Most of the 250-person team remains and will continue focusing on enterprise AI coding tools. However, the company’s long-term trajectory is uncertain, as similar reverse-acquihire startups like Scale AI and Inflection struggled to maintain momentum post-deal.