Google strikes $2.4 bn deal with Windsurf, to hire CEO Varun Mohan, get AI licensing rights after OpenAI talks collapse | Company Business News

Google’s parent company, Alphabet Inc., has finalised a $2.4 billion deal to recruit top executives and licensing rights of artificial intelligence startup Windsurf. The deal comes after talks between Windsurf and Google’s competitor OpenAI stalled, news agency Bloomberg reported, citing people aware of the development.

Google is recruiting Windsurf CEO Varun Mohan, co-founder Douglas Chen and a few staff members, who will join its DeepMind artificial intelligence team unit.

Failed deal with OpenAI

Windsurf was previously set to finalise a deal with OpenAI for $3 billion; however, the deal was not finalised, partly due to tensions with Microsoft Corp., a major OpenAI investor, the report stated.

Windsurf refused to grant Microsoft access to its intellectual property, and OpenAI was unable to secure the tech giant’s agreement on this point. This is one of the points in the ongoing negotiations between Microsoft and OpenAI regarding the company’s efforts to restructure into a commercial entity. Microsoft’s existing agreement with OpenAI states that the software major has the right to access the startup’s technology.

Meanwhile, OpenAI believed it had reached an agreement with Windsurf and nearly announced the acquisition in early May. A letter of intent had been signed, and Windsurf investors were provided information on waterfall agreements and specifying how much money each party was expected to make, people aware of the development told Bloomberg.

An OpenAI spokesperson on Friday stated that the exclusivity period for its acquisition offer has ended, allowing Windsurf to explore other bids.

Google’s latest deal comes amid a trend where major tech firms are acquiring executives and technology from emerging AI startups through agreements that fall short of full acquisitions. Critics argue that these arrangements are designed to avoid antitrust regulations.

In 2024, Microsoft recruited the founders and a significant portion of the staff of Inflection AI, as well as licensing the company’s artificial intelligence software. Similarly, Amazon.com Inc. recruited top executives and other employees from the startup Adept AI Labs Inc., while Google hired the co-founders of Character.AI through a licensing agreement. Despite the structuring of these transactions, government regulatory authorities have initiated investigations into certain such arrangements.

Windsurf, officially known as Exafunction Inc., is among a group of startups developing AI-powered coding assistants — systems capable of performing tasks like generating code from natural language prompts. Founded in 2021, Windsurf has secured over $200 million in venture capital, the report stated.

(With inputs from Bloomberg)