OpenAI’s Windsurf deal is off, and Windsurf’s CEO is going to Google

It's another Character.ai situation [0]. Unfortunate for any employees who aren't founders or researchers, as they don't get any payout or a nice new job from this exit structure. In fact they lose their whole time invested at the company.

What a harsh time to work for an AI startup as a rank and file employee! I wonder how the founders justify going along with it inside their mind.

[0] Character.ai CEO Noam Shazeer Returns to Google https://news.ycombinator.com/item?id=41141112 - 11 months ago (87 comments)

Edit: Thank you @jonny_eh for the clarification. I can't imagine it feels awesome being a leftover but at least you vested out. "Take the money and leave" is still a bit raw when the founders and researchers are now getting the initial payout + generous Google RSU's.

The rank and file equity pitch is quickly falling apart…

The “leftover” employees at Character were NOT screwed over. Options were converted to cash at the deal’s valuation.

Hopefully Windsurf employees are treated well here.

Note: I worked at Character until recently.

Not really true, I believe the "acquiring" (i.e. Google) company buys some equity from the employees (windsurf).

Edit: the people downvoting this clearly can't read, I made the exact same point as jonny_eh.

Always has been

On the flipside, I’m pretty sure the investors got screwed.

This might be the beginning of the end of tech VC startups in general.

High interest rates make VC funding more expensive and now bigtech can swoop in, poach all the necessary staff and deprive investors of an exit.

What is the point any more?

The investors made money too. The valuation at the last round was $1B, and Google paid them out at a valuation of $2.5B as part of the agreement [1].

[1] https://www.theverge.com/2024/8/2/24212348/google-hires-char...

Think it started that way... I'm currently in a vesting/allocation situation where the incentive is to drive the share price down.

Whose cash? OpenAI isn't paying, and Google isn't paying, and Windsurf investors already paid.

The acquisition of Windsurf was cancelled.

Honestly depends on when they got in. Seed investors? They're probably fine with their preferences. Series B and beyond? That's where it gets messy. What round you thinking?

Geeeeeze

Isn't there not some contractual agreement between the VCs and the founders? (I understand that a non-compete might not apply [in CA], but taking VC money is a little different that simply getting hired).

Were I a Windsurf investor, I'd be pissed right now and calling my lawyer.

FYI, It wasn't taken the money and leave, a lot of them got absorbed into GDM.

Source: I was in GDM when character was acquired.

Do you mean Google Deep Mind? Curious what use deep mind had for the leftovers (kubernetes and web scraping experts, etc)?

Otherwise why not merge all of engineering into ElGoog?

Hopefully. The world is healing.

The low level employees are screwed. Basically they lost their job. Not cool.

It's literally the opposite - seed investors get paid last with the exception of common.

the founder is on a vesting schedule set with the vc. walking away forfeits his ownership in the company (not sure of the specifics of this weird deal, but this is true in 99% of situations) which returns his ownership to the VCs either directly or functionally.

the only reason he'd walk away is because he thinks other opportunities are higher EV. if he believes this, a) the investors investment is likely worth virtually 0 anyway and b) if it's not, removing a leader who doesn't want to be there probably increases P(success) for the company and further increases the value of the investment.

founder departure isn't good for the narrative, but it's a symptom of an investment going bad, not often a cause.

I wasn’t referring to Windsurf. But if there was no cash involved here, then ya, the employees were screwed. Do we know that’s the case though?

> Unfortunate for any employees who aren't founders or researchers, as they don't get any payout or a nice new job from this exit structure. In fact they lose their whole time invested at the company.

Windsurf’s value didn’t go to $0 overnight. The company will continue and their equity is likely still worth a decent amount wherever the company ends up.

Obviously a disappointing outcome for the people who thought life changing money was right around the corner, but they didn’t lose everything.

Just like with Character I'm assuming the employees get something. Whatever nonsense "licensing" fee Google is paying to not cause an antitrust investigation should be paid out straight to employees

Instead they are paying 2.4B to "license" windsurfs IP. Still a loss vs OpenAI but at least the employees will get cash not openai stock.

This.

Character.ai reached out to me for an opportunity, but they've already been carved up.

I think it's great that the rank and file got some of their equity cash-out (based on the other comment), but I imagine it isn't an attractive prospect as a start-up to join at this point.

I just ignored the recruiter. I can't imagine their would be a second liquidity event.

> I wonder how the founders justify going along with it

$2.4 billion.

2.5x in 10 months. With returns like that - if I were the full time chef of the investors spare private jet I would be updating my CV and looking for a new gig.

The general character of capital markets is to pay as little as possible. Otherwise you lose out to those who are more ruthless. It is plausible that Windsurf employees really are getting very little value for their work. We need to see details of the deal.

To quote an analyst from the Dotcom bubble era: "Everbody's happy, everybody's making money, something's wrong here"

That’s a deep burn.

This reads like a Dr. Evil plot.

The full time masseuse should be able to help with that.