NEW STARTUPS

🚴‍♀️ Bunch Bikes (LINK) 

The minivan-ization of biking

🐶 Groomit  (LINK)

On-demand salon for 4-legged monsters, $24M in revenue

🍺 Ology Brewing (LINK)

On track for $5.5M in beverage sales this year

Why Google Paid $2.4 Billion for Windsurf AI—But Didn’t Buy It

In the battle for AI mindshare, the flashy headlines usually go to model performance or chatbot tricks. But under the surface, the next phase of the AI arms race is happening in a quieter corner of the ecosystem: developers.

Google just inked a $2.4 billion licensing deal with Windsurf AI, a company that may not be a household name—but is an important tool in the belt of developers.

This isn’t an acquisition. It’s a 4D-chess licensing agreement. One that avoids regulatory scrutiny, keeps Windsurf independent, and gives Google exactly what it wants.

But before we talk about why Google made this move, let’s rewind to the deal that didn’t happen.

OpenAI Wanted Windsurf—Until It Couldn’t

Earlier this year, OpenAI was in advanced talks to acquire Windsurf AI for $3 billion, likely in OpenAI stock (startups, even well funded ones, don’t typically have a casual 3 billy in cash lying around).

The pairing made sense: while OpenAI has plowed resources into making its consumer offering (ChatGPT) top tier, it’s fallen behind in the developer space.

Windsurf has quietly become a developer darling, integrating deeply into workflows across 4,000+ enterprises and more than 1 million developers. It offers everything from contextual code completion to linting, deployment previews, and search.

If you're building software in 2025, Windsurf is one of the go-to products. And that is a lucrative spot to be in - the 4-year old company was already raking in $100M in revenue annually.

So why did OpenAI walk?

One word: Microsoft.

OpenAI and Microsoft have a unique partnership. In exchange for infrastructure and capital, OpenAI has agreed to funnel all its intellectual property into Microsoft’s hands—until AGI is achieved. That includes any IP it might acquire.

Here’s where things got complicated: If OpenAI bought Windsurf, all of Windsurf’s IP would have automatically flowed into Microsoft. For free.

The problem? Microsoft already owns VS Code, and it co-developed GitHub Copilot. Giving it Windsurf’s IP on top of that would consolidate way too much power in one stack.

So OpenAI backed out.

Who Else Could Have Bought Windsurf?

Not many.

• Anthropic was never going to be a buyer. Not only are they the leading dev-focused model, but there’s also bad blood between them and Windsurf from prior competitive collisions.

• Microsoft didn’t need Windsurf. Between VS Code and Copilot, they already have a dominant position in developer tools. Plus, they would’ve gotten the IP for free through OpenAI anyway.

• OpenAI was blocked, for reasons above.

That’s when Google stepped in.

The Figma Problem—and Google’s Clever Workaround

You probably remember when Adobe tried to acquire Figma for $20 billion. That deal fell apart after regulators stepped in, and cost Adobe a $1B breakup fee that went into the coffers of their main competitor. Yeesh.

Google wasn’t about to walk into that buzzsaw.

Instead of acquiring Windsurf, Google structured a novel workaround:

• $2.4 billion paid in cash

• No equity exchanged

• Non-exclusive IP license

• Founders and top researchers acqui-hired into Google DeepMind

• Windsurf remains an independent business with its existing customers and team

On paper, Windsurf keeps running as usual. But Google now has the keys to the kingdom—at least enough of them to integrate Windsurf’s capabilities across its AI stack, developer tools, and enterprise cloud products.

Did the Founders Leave Money on the Table?

That’s the hot question.

Founders have a fiduciary duty to act in the best interest of their company, so they’re not allowed to personally benefit while screwing over the company.

Let’s do some back-of-the-envelope math.

OpenAI’s deal was reportedly valued at $3 billion, likely in stock. The Google deal is $2.4 billion in cash.

At first glance, that looks like a haircut. But here’s the nuance:

• The $2.4B is non-dilutive—no equity shares changed hands.

• Employees and investors still retain full equity in the standalone Windsurf business.

• The licensing deal doesn’t sunset that business, and there are no exclusivity terms that would impede their existing business.

With $100M+ in annual revenues, Windsurf is far from dead in the water. The retained equity could still have significant upside.

So, instead of a $3B all-stock exit that folds Windsurf into a bigger org, you now have:

• $2.4B in immediate value - some have conjectured that this will likely be paid out to investors/employees in the form of a dividend.

• Plus the future value of Windsurf as an ongoing, independent company

A complex, but potentially not bad outcome for investors + employees given there were few alternatives.

Why the Developer Ecosystem Is the Next AI Battleground

So why all this fuss over developer tools?

Here’s the bigger picture: In the race for AI dominance, developers are a force multiplier.

Every dev who builds on your stack is an implicit distribution channel. They’re the ones creating apps, integrating APIs, and building infrastructure on top of your models. And the more they build with you, the more locked in they (and their customers) become.

Think of it this way:

• When AWS won over developers, it became the default for startups.

• When Stripe won over developers, it became embedded in the modern internet.

Control the developer workflow, and you control how the next generation of AI-native software gets made.

That’s what Google just bought into.

So What Does This Mean for Investors?

Many commentators on X were quick to point out that investors & employees with stock packages were getting screwed by the mechanics of this deal.

But not to fear - after I finished writing this piece, AI startup Cognition announced they were acquiring Windsurf. In a post to X, Cognition’s CEO stated that ‘100% of Windsurf employees will participate financially from the deal’.

This was perhaps the deal all along, but poor internal communication might have left Windsurf employees feeling left out in the cold for a moment.

So in the end:

• Google gets what it wants

• Windsurf top brass get major paydays at Google

• Cognition gets a great addition to their business, potentially on the cheap since it doesn’t come with many top employees

• Windsurf employees get an exit

• OpenAI/Microsoft get nothing

The AI space is white hot right now - there have not been too many opportunities in crowdfunding, but I’m keeping my eyes open for them.

Related Reads from CROWDSCALE

• The Man Who Told Kevin O’Leary No

• Is This AI Tool the Next Grammarly?

• My Version of Barbell Investing