Cognition (Devin AI) to Acquire Windsurf

This is the logical, satisfying, and probably best conclusion to an un-ideal and optically terrible situation all parties were placed in.

First, OpenAI wanted to acquire Windsurf. Terrific move! Win-win for OpenAI (who needs more AI product) and Windsurf (for the deal price). But this fell apart because Windsurf didn't want the IP to go to Microsoft (which imo should not have been not a big deal, especially if you knew what would have happened next). Big loss for all parties for this to have fallen apart.

My biggest question still is why not continue on as an independent company? Perhaps losing access to Claude doomed signups; perhaps employees/investors had a taste of an exit and still wanted it; perhaps due to fiduciary duty to maximize returns; perhaps their growth stalled due to the announcement? In any case, the founders got a similarly equivalent deal from Google, and were arguably wise to pursue it.

But Google's Corp Dev team here is the most maddening. Why not fully acquire the entire company, instead of doing the same "acquihire and license" deal that was done to Character AI, Adept, Scale, etc.? Risk of FTC antitrust review is a thing, but Google's not even competitive in the coding market, so I doubt there is a review (though I do hear that all acquisitions by large tech companies these days are reviewed by default). If there's anyone to blame in this situation, it's the FTC and Google for pursuing this strategy, instead of a full acquisition. Win-win for Google (for the team) and Windsurf (for getting a similar acquisition price, but liquid!).

Imo, the founders did a good job ensuring that close to the $3B acquisition price was reflected in the $2.5B Google deal--all existing investors and vested employee/equity holders are paid out; the company also retained $100M which was suspiciously similar to the amount needed to pay out all unvested employee/equity holders [1]. So theoretically the remaining company could pay accelerate vesting, then pay out the cash to their remaining employees, and then shut down, to give everyone the same exit as an acquisition, or better. This might have been the best scenario, because the brand damage to Windsurf as an IDE that happened over the weekend was pretty close to unrecoverable for them as an independent company.

But instead, the company leadership decided to field acquisition offers for the remaining company and IP, and got one from Cognition. (I'm actually surprised this acquisition isn't under FTC review; it's more plainly an agentic coding company acquiring a competitor agentic coding company). In taking the offer, it reinforces that the Windsurf IDE will continue to exist, that they have a R&D team backing the IDE again, and can marry Windsurf's enterprise sales chops with Cognition's product [3]. Win-win for both Cognition and Windsurf.

So overall, win-win-win all around, except for OpenAI, Varun's public reputation (imo, undeserved), and startups hiring employees (who might think they might not get a proper exit) [2].

[1] https://x.com/haridigresses/status/1944406541064433848

[2] https://stratechery.com/2025/google-and-windsurf-stinky-deal...

[3] https://x.com/russelljkaplan/status/1944845868273709520

> -all existing investors and vested employee/equity holders are paid out;

But the statement from Cognition was:

  >    100% of Windsurf employees will participate financially in this deal
  >    100% of Windsurf employees will have vesting cliffs waived for their work to date
  >    100% of Windsurf employees will receive fully accelerated vesting for their work to date

The details matter. "vesting cliffs waived" meaning what? Windsurf shares exchanged for Cognition shares? at what ratio?

"Participate financially" means what exactly? They could all get a coupon for a free doughnut, and that statement would be true.

I'm not saying the employees are getting nothing, or even a raw deal. I'm saying we have no idea if the deal is good for them, without details.

> theoretically the remaining company could pay accelerate vesting, then pay out the cash to their remaining employees, and then shut down, to give everyone the same exit as an acquisition, or better.

unlikely that will happen. More likely the investors and VCs will take the lion's share of the $2.5B, that is what they do. That is why they exist. And they'll distribute as thin a slice as possible to the employees.

Historically, when a company gets acquired, the terms of the acquisition vary wildly. Many acquisitions over the past few years have led to a payout of all equity holders, pennies for employees, and layoffs for much of the existing team. This outcome is no worse than an existing acquisition--people just want details because of the new structure. My point is that this is financially no worse than an existing acquisition. It just _feels_ worse because of how it's structured.

And to your last paragraph, read reference [1]. The distribution of that 2.5B is in accordance to the existing cap table; it will make sense once you read that tweet. You must allocate money according to the cap table, and so that allocation is already determined in a company's previous funding rounds.