Google scuppers OpenAI's $3 billion Windsurf deal

Google has signed a licensing agreement with coding startup Windsurf, defeating OpenAI's $3 billion bid to acquire the company after the agreement's exclusivity period expired. A source familiar with the matter told Fortune that the agreement means Windsurf will continue operating as an independent venture, while key members of the team will join Google.

"We're excited to welcome some top AI coding talent from the Windsurf team to Google DeepMind to advance our tool coding efforts," a Google spokesperson told Fortune in an email. The email also included a statement from Windsurf founders Varun Mohan and Douglas Chen, who said, "We're excited to be joining Google DeepMind along with some of the Windsurf team."

The news signals a major problem for OpenAI, the creator of ChatGPT, and comes as the generative AI startup is scooping up talent from rivals like Meta. An OpenAI spokesperson confirmed to Fortune that the exclusivity period for the $3 billion acquisition deal signed with Windsurf in May has expired, and Windsurf may consider other options.

Coding startups that use generative AI to help programmers write code have become one of the most popular categories in the tech world. Cursor, a venture capitalist backed by Thrive Capital, Accel, and Andreessen Horowitz, recently raised a $900 million Series C round, reaching a $9 billion valuation.

According to a report in TechCrunch, OpenAI had approached Anysphere about acquiring Cursor before making an offer to Windsurf, but the talks fell through because the startup wasn't interested in being acquired "even by OpenAI."

Founded in 2021 by students at MIT and initially called Codeium, the startup changed its name to Windsurf in April, shortly before the OpenAI proposal. Investors include Founders Fund, General Catalyst, Greenoaks, and Kleiner Perkins. TechCrunch reported in February that Windsurf had closed a funding round at a $ 2.85 billion valuation.