Google, a subsidiary of Alphabet, has hired several key employees from the AI coding startup Windsurf, in a surprising move that comes shortly after rival OpenAI attempted to acquire the company.
According to a source familiar with the matter, Google will pay $2.4 billion in licensing fees as part of the agreement to use some of Windsurf’s technology on a non-exclusive basis. Notably, Google will not acquire any equity in the startup.
Windsurf’s CEO Varun Mohan, co-founder Douglas Chen, and several members of the company’s research and development team will join Google’s AI division, DeepMind.
Sources told Reuters back in June that Windsurf had held acquisition talks with OpenAI for months, with a potential deal valued at up to $3 billion. The talks underscore the growing competition in the AI code generation space, one of the fastest-growing areas of artificial intelligence.
The former Windsurf team will now focus on AI agent-based programming initiatives within DeepMind, with a primary role in the development of Google’s "Gemini" project.
The unconventional structure of the deal is a win for Windsurf’s investors. The startup has raised $243 million from backers including Kleiner Perkins, Greenoaks, and General Catalyst, and was last valued at $1.25 billion a year ago, according to data firm PitchBook.
Sources indicated that Windsurf’s investors will receive liquidity through the licensing fees while maintaining their ownership stakes in the company.
Acquihires Gaining Momentum
Google’s move mirrors a similar talent-focused deal in August 2024, when it hired key staff from Character.AI, a company known for its chatbot technologies.
Major tech companies—like Microsoft, Amazon, and Meta—have also ramped up what are known as “acquihires,” a practice some critics see as a way to sidestep regulatory scrutiny.
An “acquihire” typically involves acquiring or investing in a smaller company not for its products or services, but to onboard its talented workforce. It’s a strategic shortcut to access high-performing teams that can drive innovation within the acquiring firm.
In March 2024, Microsoft struck a $650 million deal with Inflection AI to gain access to the startup’s AI models and team. Amazon followed suit in June, hiring the co-founders of AI startup Adept and several team members. Meanwhile, Meta acquired a 49% stake in Scale AI that same month, marking one of the most significant examples of this growing form of business partnership.
Unlike traditional acquisitions, which give the buyer a controlling stake and typically undergo antitrust reviews, acquihire deals often bypass such scrutiny. However, regulators can still investigate these transactions if they believe the structure was designed to evade oversight or harm competition. Several recent deals are now under regulatory review.
This trend reflects the heated race among tech giants—like Alphabet and Meta—to secure top-tier talent in the push to lead the next wave of AI development. These companies are offering multimillion-dollar salaries and engaging in bold deals to stay ahead.
Despite the changes, most of Windsurf’s approximately 250 employees will remain with the startup, which has announced plans to prioritize innovation for its enterprise clients.
