You may not have heard of Windsurf — but back in May, this little-known AI coding startup briefly stole the spotlight. Windsurf had built an AI software engineering model called SWE-1. The startup was making serious waves, with over $80 million in annual recurring revenue, more than a million users, and even a $3 billion acquisition offer from OpenAI.
But that deal never went through.
Why? Reports suggest Microsoft’s deep ties to OpenAI — and its ownership of GitHub Copilot, a direct competitor to Windsurf — created a conflict. This tension reportedly helped derail the deal.
Just when it looked like the story was over, another tech giant jumped in.
Google made a move — but not in the way anyone expected
Instead of buying Windsurf or even its product, Google spent $2.4 billion to hire Windsurf’s CEO (Varun Mohan), co-founder (Douglas Chen), and a few of their top researchers.
Shortly after that, Windsurf’s remaining assets were sold off to a different company.
Just like that, a $3 billion AI unicorn with serious potential was split apart and effectively shut down.
A Growing Trend in the AI Arms Race
What happened with Windsurf isn’t an isolated case — it’s part of a fast-emerging trend in the tech world. In recent months: Meta has reportedly spent hundreds of millions to poach AI talent from OpenAI, Apple, and DeepMind.
Amazon hired the founders of robotics startup Covariant — but not the company itself.
Microsoft paid $650 million to acquire the team and technology from Inflection AI, while leaving the rest behind.
In each case, tech giants are sidestepping traditional acquisitions. By hiring away elite teams and founders directly — instead of buying the companies — they avoid regulatory scrutiny and still get the talent they want.
Why This Matters for AI Investors
As the race for AI dominance heats up, success won’t just come down to the best technology, biggest markets, or most capital. It’ll also come down to who can attract and retain the smartest people.
This kind of talent acquisition can make or break a company.
If you’re investing in AI startups, pay close attention. A promising business can unravel quickly if its founders or key engineers are poached. Even if the tech is great, losing core talent can cause the company to fall behind — or collapse entirely.
The takeaway?
When it comes to investing in megatrends like AI, don’t just focus on revenue, profits, or products. The people behind the company matter just as much — maybe even more. If you’re eager to invest in AI but don’t know where to start then I suggest you follow South African Investor for some of the best AI research around.
Not a subscriber to Money Morning?
You can get free daily recommendations like these with Money Morning eletter. Just sign up here.
