Windsurf Acquired by Cognition: A Tale of Transition and Turmoil

Following the acquisition of AI coding startup Windsurf by Cognition, executive Jeff Wang took to X to shed light on the challenges surrounding the deal.

Failed Talks with OpenAI Opened New Doors

Windsurf was initially in acquisition talks with OpenAI, but that deal collapsed. Instead, Google DeepMind hired CEO Varun Mohan and other key personnel from Windsurf. Reports indicate Google will license Windsurf’s technology for $2.4 billion but will not acquire the company outright.

The Rise of “Reverse Acquihires”

This incident highlights a growing trend of “reverse acquihires,” where major tech firms hire key members from startups to mitigate antitrust concerns while licensing their technologies rather than executing full acquisitions.

Impact on Employees Left Behind

This raises a critical question: What happens to the startups and their employees once top talent departs? In a recent episode of Equity, a founder likened leaving executives to a captain abandoning ship in turbulent waters.

Windsurf’s Leadership Step Up Amidst Uncertainty

After Mohan’s exit, Wang, previously the head of business, took over as interim CEO. He expressed sympathy for Mohan and Chen, recognizing the difficulty of their situation.

All-Hands Meeting Reveals Employee Sentiments

During a company-wide meeting on June 11, expectations were high for news about the OpenAI deal. Instead, Wang had to share the disappointing Google acquisition and the departure of key figures. “The mood was very bleak,” he reflected. “Some were upset about financial outcomes, while others were anxious about the future; a few were in tears.”

Potential for Recovery

Despite setbacks, Wang believes Windsurf still has significant assets, including intellectual property and talented personnel, to pursue further investment, a sale, or continuing operations.

Negotiations with Cognition Begin

That same evening, Wang was in discussions with Cognition’s Scott Wu and Russell Kaplan. Following a frantic weekend of negotiations, they kept interest from other potential suitors in mind while also addressing the needs of Windsurf’s remaining engineers.

A Strategic Fit for Future Growth

Wang argued that Cognition and Windsurf make a great partnership due to complementary strengths. “Cognition had overinvested in engineering but underinvested in go-to-market and marketing,” he explained, adding that Windsurf possesses world-class talent in these areas.

Commitments to Employee Welfare

Wang noted a focus on ensuring the welfare of Windsurf’s employees was paramount during negotiations, resulting in a deal structure that includes payouts for all staff, the waiving of cliffs, and accelerated vesting for Windsurf equity.

A Rollercoaster Weekend: From Fear to Hope

The acquisition agreement was finalized at 9:30 AM on Monday, announced to the team shortly after, and disclosed to the public not long thereafter. In an interview with Bloomberg, Wang described the tumultuous Friday as “probably the worst day of 250 people’s lives,” followed by what felt like “probably the best day.”