Windsurfed Away

 Windsurfed Away: How an AI coding startup
sparked a Billion-Dollar Tug-of-war

In one of the most compelling AI business stories of 2025, a relatively young coding startup said to be established in June 2021, goes by the name of Windsurf founded by Varun Mohan (CEO) and Douglas Chen (Co-Founder).It originally started out as Exafunction, a startup dedicated to optimizing GPU utilization at scale but now is at the center of a whirlwind deal involving OpenAI, Google and Cognition AI. This wasn't just about technology, it was about talent, power and the future of AI programming tools.

CASCADE : Windsurf flagship product

A little more on the origins of Windsurf 

So as we have read about, Windsurf began its journey in 2021. However was originally known as Codeium. Founded by engineers and researchers from Stanford, it aimed to build smarter, faster AI tools for software developers. There flagship product, Cascade is more than a simple code autocomplete, it also functioned as an AI software engineer assistant. It could understand project context, write code, fixing bugs and even run test scripts, making it a powerful all-in-one development agent.

By early 2025, Windsurf had:

• Over 1 million developers using its tools
• More than 350 enterprise clients
• Approximately $82 million in annual recurring revenue

Backed by the top venture firms like Kleiner Perkins and General Catalyst, it was quietly becoming a serious rival to GitHub, Copilot and Amazon's CodeWhisperer.

How OpenAI tries to make a deal

In mid-year 2025, OpenAI made a bold move: it entered exclusive talks to acquire Windsurf for around $3 billion. The plan was to integrate Cascade's technology and team into its growing AI ecosystem, but there was a catch. Microsoft, OpenAI major investor, reportedly objected due to intellectual property concerns.

When Microsoft declined to support the acquisition, the deal collapsed. So, Windsurf was back on the open market, and now worth even more value due to the attention.

Google Makes a Strategic Play

In July 2025, Rather than buy the whole company, Google executed what's know as a "reverse acquihire". For $2.4 billion, Google hired Windsurf's CEO Varun Mohan, co-founder Douglas Chen and a larger group of researchers then licensed some of the technology.

This clever move let Google: 

• Avoid regulatory headaches 
• Get top-tier AI talent for its Gemini coding initiatives 
• Strengthen its DeepMind division in the growing field of agentic AI.

The rest of Windsurf, it's brand, product and remaining team was left behind, still independent but leaderless.

Cognition AI Acquires What's Left

Cognition AI (creators of the AI coding agent Devin) acquired all remaining Windsurf assets: the Cascade product, customer contacts, intellectual property and remaining employees.

The acquisition gave Cognition:

• An established user base
• A powerful IDE designed for AI-first development 
• A team ready to merge with Devin's agentic capabilities 

100% of Windsurf employees benefited financially through accelerated vesting and waived stock cliffs, something Google's deal reportedly didn't offer.

Why it all matters

This saga is more than just another Silicon Valley shake-up, it's a signal of where the AI world is heading:

• AI coding assistants are the next frontier and Big Tech wants to dominate it
• Top AI talent is now worth billions, sometimes more than the tech itself
• Agentic AI systems that don't just assist buf act is rapidly becoming the gold standard in software development tools.

By splitting the company, Google gained elite minds. Cognition got the product and momentum. And OpenAI? They were left watching from the sidelines. 

Final Thoughts 

In under a month, Windsurf transformed from a rising coding startup into a prize divided between two AI giants. It's a reminder that in the AI arms race, speed, strategy and talent can outweigh even the biggest valuations. Windsurf's legacy, the winds of innovation are still blowing, just under new flags.

Thanks a lot for reading, every visit is greatly appreciated. Please share and comment, and follow us on socials, we are currently only on x but more socials are to come soon.

X (Twitter)

The Tech Quest Journal @Journal_ttechq

Email: contact@thetechquestjournal.com

Primary Sources :

Windsurf 

MarketWatch

Reuters 

TechCrunch

VentureBeat

IndiaTimes