Google snatches AI coders after OpenAI tried to buy their startup

Google has pulled off a strategic talent acquisition by hiring key executives and engineers from AI coding startup Windsurf, following failed acquisition talks between Windsurf and Google rival OpenAI. Google will pay $2.4 billion in licensing fees to access some of Windsurf's technology while allowing the startup to remain independent, according to a report by Reuters. 

The deal brings Windsurf CEO Varun Mohan, co-founder Douglas Chen, and select R&D staff to Google's DeepMind division, where they'll focus on enhancing Google's Gemini AI coding capabilities. Notably, Google isn't taking an ownership stake in Windsurf, an unusual structure that lets current investors keep their shares while receiving payouts through the licensing arrangement.  

The move comes after months of negotiations between Windsurf and OpenAI about a potential $3 billion acquisition amid fierce competition in AI-powered code generation tools. Windsurf, last valued at $1.25 billion, has attracted $243 million in funding from prominent venture firms like Kleiner Perkins and General Catalyst, reports Reuters.

"Windsurf's team will advance our work in agentic coding," Google stated, confirming the high-profile hires, as per the Reuters report. Meanwhile, Windsurf has promoted Jeff Wang to interim CEO and Graham Moreno to President, with about 250 employees staying to serve enterprise clients.