In the days following the announcement that Windsurf, an AI coding startup, was being acquired by Cognition, Windsurf founder Jeff Wang addressed X to provide additional information regarding the ambiguity and controversy surrounding the purchase.

Windsurf was previously reported to be in acquisition talks with OpenAI; however, the transaction fell through.
Google DeepMind subsequently hired the startup’s CEO Varun Mohan, co-founder Douglas Chen, and several of its top researchers.

According to reports, Google would license Windsurf’s technology as part of the $2.4 billion agreement, but it would not acquire an equity stake in the company.

This appeared to be the most recent example of the “reverse acquihires” trend, in which large technology companies attempt to circumvent antitrust scrutiny by employing key startup team members and licensing their technology, rather than acquisition startups outright.

However, what is the fate of the enterprises and the employees who are left behind? As we discussed in the most recent episode of Equity, a startup founder likened the departing Windsurf executives to a commander forsaking his crew onboard a drowning ship.

The company’s interim CEO was Wang, who had previously served as Windsurf’s director of business, following Mohan’s departure.
In his post on X, he expressed some sympathy for Mohan and Chen, whom he referred to as “great founders” in a situation that “must have been difficult for them as well.”

Nevertheless, Wang described an all-hands meeting that took place on Friday, June 11, during which the majority of team members anticipated learning about the OpenAI acquisition.
Rather, he was compelled to inform others of the Google agreement and the subsequent personnel changes.

Wang stated, “The atmosphere was exceedingly depressing.” “While some individuals were concerned about the future, others were upset about financial outcomes or colleagues’ departures.”

The Q&A was understandably hostile, and a few individuals were in tears.
Wang believed that despite the fact that the company had “lost some great people and taken a serious blow to morale,” it still possessed “all of our IP, product, and strong talent, including an excellent [go-to-market] machine.”

Therefore, Windsurf may continue to pursue additional funding, sell, or simply persist.
However, Wang was informed by Cognition executives Scott Wu and Russell Kaplan that evening, and he stated that Windsurf leadership “took the Cognition approach very seriously from the start and launched right into negotiations.”

According to his account, the subsequent weekend was characterized by a frenetic pace of discussions with Cognition, as well as the consideration of inbound interest from other potential acquirers and the meeting with Windsurf’s remaining engineers to persuade them to remain.

At the same time, “the timeline was exploding with memes and commentary.”
Wang contended that the two organizations were well-suited, in part due to their complementary teams.

“They had overinvested in engineering, but they had genuinely underinvested in GTM and Marketing, and our teams in those functions are nothing short of world-class,” he stated. “However, we were currently lacking a Core Engineering team, and the AI engineers that Cognition has assembled are unparalleled.”

In addition, Wang stated that he and Wu (pictured together above) agreed regarding the necessity of “taking care of all Windsurf employees.”.

“That led to a critical component of the agreement: the structuring of the agreement to provide a payout to all employees, waive all cliffs, and accelerate the vesting of all Windsurf equity,” he stated.

The acquisition agreement was reportedly signed at 9:30 a.m. on Monday morning, and it was subsequently disclosed to the team at a subsequent all-hands meeting. A public announcement was made shortly thereafter.

Wang characterized the all-hands meeting on Friday as “probably the worst day of 250 people’s lives” in an interview with Bloomberg. He then described Monday as “probably the best day.”