OpenAI has agreed to buy Windsurf, an artificial intelligence-assisted coding tool formerly known as Codeium, for about $3 billion, according to people familiar with the matter, marking the ChatGPT…
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By neonate 2025-05-0612:55 Incredible timeline to a $3B exit
> Windsurf began in 2021 as Exafunction, founded by MIT graduates Varun Mohan and Douglas Chen. The company initially focused on GPU optimization before pivoting to AI-assisted coding tools, launching Codeium, which later evolved into Windsurf.
> Series B (January 2024): $65 million at a $500 million valuation.
> Series C (September 2024): $150 million, led by General Catalyst, at a $1.3 billion valuation.
> May 2025: $3 billion acquisition from OpenAI
I wonder how much of the value is really from the model or the tooling around it. They all use the same models (mostly Claude, others have been horrible and buggy in my experience). Even co-pilot agent mode now uses Claude. The editor has their own LLM (?) that does the apply since LLMs often return snippets. They work well enough on Cursor. And then you have the auto-complete, which I think is their own model as well.
But the main value from me is from the agent mode and 95% of the value is the underlying model. The other stuff could be more or less a VS Code plugin. The other benefit is the fixed pricing. I have no idea how much 500 calls cost if I were to use the API, but I expect they're probably losing money.
By sagarpatil 2025-05-073:519 reply I’ve been a WindSurf customer since day one. It was my first true AI agentic experience.
[Dev mode] While working on Alembic migrations I broke one of my migration files. After an hour of manual debugging I handed the task to WindSurf. It methodically checked every config file, applied the migrations one by one, and narrowed the issue to a single file. It rewrote the migration, verified the fix, wrote tests, ensured everything passed, and opened a PR. I reviewed it and it worked flawlessly.
Regarding the acquisition I don’t understand why OAI would pay $3 B. The team is strong, they have lots of data, and the agentic flow is great, but all of that feels commoditized.
Claude Code launched two months ago and I prefer it to WindSurf, Cursor, and Aider. Augment Code also ranks above WindSurf for me.
If I were in Sam’s place I would have doubled or tripled down on Codex CLI. Just my 2 cents.
I was involved in an M&A once; my role was to evaluate the technology and determine how long it would take us to build a competitive product. If it was less than some X then we’d build it, greater than X and we’d buy. The function for X was not clear to me from my perspective; it had legal fees involved, etc.
The person leading M&A said an intangible aspect of the price is what it does to the adjacent market. If the leading product A is valued during a raise at $Y, and you buy the next best product B at 1/10 that, you cause future issues with raises for A.
Might this be an attempt to clip Cursors wings?
That's a really interesting thought, I'd love to get involved in software PE/M&A on the technical analysis side but I don't have the academic pedigree for it (it seems every shop that does this work is 90% Ivy and Ivy-adjacent universities and FAANG-level work history).
So if I'm understanding your point then part of the value in paying $3B for Windsurf is that it acts as a pricing anchor on future raises (and presumably acquisitions as well) for competing products? So Cursor is less likely to raise at a $30B valuation if Windsurf is 95% as good and just sold for 1/10 that.
By whatshisface 2025-05-0718:01 The insanity of it all is that these companies are worth about $3M.
By dayjah 2025-05-083:33 You have superbly summarized the point I was trying to make regarding valuations.
Regarding your other point about pedigree: I’ve a high school level education. I was considered senior at this specific co. as I had played an important role in building the product (I’m a “classic case” of self taught generalist). I’m not at all clear on how I was selected to take part in that effort to be frank. It was fun.
I would also think that a critical component of X there would be the opportunity cost of time spent on building in-house while competition chugs along.
By dayjah 2025-05-083:39 For sure, as was the opportunity cost of redirecting our engineering teams to produce the competing product. That is, slowing the roadmap on our core product to deliver a tangential product.
Also, we had to factor into account user management, infosec bring-up, streamlining deployment, cross training teams, etc.
This was a large co., there was generally the belief that everything can be copied relatively quickly to reach something like parity. Obviously, the discovered path has tons more learning in it that the copier doesn’t benefit from when making subsequent decisions, which can result in lots of time lost.
By anonzzzies 2025-05-076:44 > WindSurf, Cursor, and Aider. Augment Code also ranks above WindSurf for me.
Bring on (a lot) more competition! I am waiting for the point where "Simple Pricing" (Augment Code has that on the pricing page) means fixed pricing; Simple is NOT '600 messages included' because it's impossible to know what the ROI from those 600 messages is, so it's very far from 'Simple' (many of those prompts will deliver nothing or, worse, having to rollback because the agent produced garbage). I know it's not sustainable, but the only thing that will keep me not jumping from one to the other, signing up with different emails, trials, coupons etc is if they will lose the restrictions on usage. They will, as they have to compete and it's worth it seeing this acquisition; losing 10s of millions a month to get/keep people and getting nice growth is what they do to get the billions. So bring it on!
By boringg 2025-05-0713:12 If he's (Sam) trading equity on a grossly inflated OpenAI for the acquisition then he's likely not paying real money for the company and thus he is expanding his roadmap for cheap.
By adventured 2025-05-074:042 reply They're paying $3 billion because money is hyper plentiful for OpenAI at present. Basically because they can. Money isn't their problem right now, it's not a scarce resource (maybe it will be in the future of course). They're trying to capture and lock-in, so as the hurdles and regulations go up they're one of the huge winners left standing.
Try replacing Uber today, it's impossible. Nobody is going to give you billions of dollars to try to do it. It'd be an absolute nightmare to attempt it.
By mike_hearn 2025-05-078:481 reply Uber has already been replaced, at least in some parts of the world. We recently went on holiday to Malta and on check-in the hotel staff told us not to bother with Uber, Bolt worked way better and had more drivers (Bolt is a European Uber competitor based in Estonia).
So we signed up for Bolt and sure enough drivers were plentiful, the app worked great and there was no downside over Uber. I'll certainly be trying it again in future in other markets.
The reason Uber invested in self-driving cars for years is that otherwise they have no sustainable edge. It's just a taxi company, which is a low margin business. People who can make slick mobile apps are plentiful and it takes a minute or less to sign up for a new service. Uber grew to its current size by buying market share using investors dollars, which was always a time-limited strategy. Once they started having to turn a profit prices rose and their edge over their competitors was lost.
By petesergeant 2025-05-079:011 reply Uber feels like such an apt comparison to OpenAI to me. The service they provide is obviously going to be absolutely huge, but no guarantees at all that they’ll win it or be last man standing. I don’t see a world in which generative AI doesn’t continue to be a massive disrupting force, but no particular reason to think Anthropic or OpenAI will still be independent entities in a few years.
I’m even more bearish on Uber than I used to be, as someone who’s used Grab and Careem and Bolt extensively, and seen Uber have to beat a retreat from SE Asia. If their more nimble competition get a foothold in the US they’re toast.
By saalweachter 2025-05-0713:461 reply I feel like the value-proposition of Uber was three-fold.
1. Solving a pain-point of many people re: hailing a cab, via an app that works everywhere.
2. Using VC funds to (initially) pay drivers more than you, the customer, were paying them.
3. Ignoring local regulations and passing the savings/convenience on to you.
1 is nice but I don't think they established much of a moat (both drivers and customers are willing to use multiple apps); 2 isn't sustainable in the long-term, and they failed to leverage 3 to establishing a permanent right to operate as they had been in most markets.
I think this makes Uber an even more interesting benchmark for other unicorns, since besides "solving a real problem without establishing a moat" they are also often burning through VC cash to prop up their business model while ignoring some laws which they may not be able to get away with ignoring long-term.
By datadrivenangel 2025-05-0714:51 1 especially is a social function. Having to have a million different apps is terrible, but if there is too much competition for drivers it's inevitable to churn through apps because of marketplace pricing and rent seeking on all sides
sometimes companies are acquired for things the public has not yet seen.
By johntarter 2025-05-075:232 reply Companies are acquired for customer base, ARPU, and growth. Same criteria as when when raising funding.
By jahewson 2025-05-076:30 Those are the best reasons, but companies are also acquired for marketing, hype, to relieve a sense of fear, to curry favour, etc…
By jillesvangurp 2025-05-077:592 reply I don't think that's the case here. Windsurf wasn't leading the agentic coding market. They were doing a decent job but others are bigger. Cursor has the brand recognition and Claude is getting a lot of recognition too. MS has github copilot which is still a good brand and Google has been catching up with Gemini.
OpenAI has a new thing called codex but it isn't very good yet. I tried it and it's super flaky. Lot's of errors and it gets stuck when that happens. OpenAI needs something good urgently because agentic coding is the key AI feature right now and the blue print for non coding agentic solutions later. Cursor is probably too expensive currently and windsurf looks like their models are a bit better.
So, OpenAI gains something they don't have: a credible developer option with an active user base and some core IP in the form of training data and know how as well as custom models that they can fold into openai.
3 billion is a lot but not if you consider that world + dog in the enterprise world will be spending big time on AI subscriptions for their developers. This stops being optional in 2025. Millions of developers will be on paid subscriptions permanently very soon. If you start a new job you can expect to get a laptop and a paid subscription to whatever is the agentic coding tool of choice in your new company.
OpenAI wants double digit percentages of that revenue. 1M users paying something like 50$/month would amount to 600M revenue per year. I think the prices will go up and the amount of active users as well. Reason: as these tools are getting better they start saving non trivial amounts of engineering time. At that point you have to value the tool in terms of developer cost. Not 1 to 1. But it's worth a sizable portion of that.
I work in a small startup as the CTO. This is an no-brainer for us. We're cash strapped so we only spend on important things. This would be one of those things. We're doing things I previously would have needed to expand the team for because I would have had no capacity to do those things in the current team. So, in terms of value for money spending on these tools is easy to justify.
I get lots of people are skeptical about AI stuff here. But I would say that a lot of those people suffer from a short term focus and bias. Three years ago none of this stuff existed. Now it's a multi billion$ market that is set to grow rapidly. Stuff is getting better at a very rapid pace. Just stating facts here. 3 billion is a bargain if Openai can make this acquisition work for them. They are buying time to market here. They don't have a year to figure it out. In a year or so this market will be carved up and locked into hard to change year long SAAS contracts. At that point getting people to switch tools will get harder and harder.
> OpenAI has a new thing called codex but it isn't very good yet. I tried it and it's super flaky. Lot's of errors and it gets stuck when that happens.
I agree with this, not sure the experience of everyone else but I felt like Claude Code is more useful.
Meanwhile, I'm keeping tabs on Aider and open-codex, what other options are there?
By therealmarv 2025-05-0715:411 reply Thanks for mentioning open-codex. Did not notice that there is a codex fork which is open to other models (update: totally missed that original codex allows that too now). How do you like it? Especially in comparison to Claude Code?
By pantulis 2025-05-0810:26 Thanks for answering! I also skipeed that the original codex now allows for other models (perhaps they pulled the open-codex part???). To be fair, I prefer Claude Code to both codexes.
By justanything 2025-05-0710:082 reply I wanna pick your brain a lil. Are you saying agentic AI has helped you replace devs that you would otherwise need for your startup?
In your opinion, what should one do/learn to get a SDE/related gig now? What do you/other companies look for?
By jillesvangurp 2025-05-0711:351 reply Not replace but it allows me to scale what we do for things we previously would have dropped because it would require growing the team, which we can't really afford. It's a case of getting a bit more out of developers in terms of quantity and scope (mostly this) of what they do. Not a full developer but enough for it to be meaningful. But it's not nothing either. Worth paying for. AI is a lot cheaper than a developer is so I don't need to replace my developers. I prefer people that are multi disciplinary and able to pick up new skills as they are needed. Agentic AIs are good for that because they give you enough to work with that you can get productive with whatever you need to wrap your head around in little to no time.
Companies can be a bit slow to update their hiring processes to their needs. But good developers should be ahead of the curve in any case. For this, just be proficient with the tools.
Be ready for the inevitable interview question "so, AI ... explain me how you are using it and what you are doing with it?". Much easier to answer that question if you have some meaningful time of routinely using this stuff behind you and can articulate what works and doesn't work for you.
And if they don't ask, that's actually a great question to ask back if you get the opportunity "I've been using agentic tooling, how are you guys using that a <company name>? Also I would like a subscription to <my favorite AI tool> if I work for you". Stuff like that makes you stand out as ambitious and interested in the future. There are of course going to be places that maybe don't like that. But then ask yourself whether you'd want to work there. So, either way, you learn something.
By justanything 2025-05-0711:501 reply Thank you for responding :)
So, would you consider it a bad idea to get into web dev, more specifically backend and infra?
Do you think using LLMs can accelerate learning software dev and programming skills?
By jillesvangurp 2025-05-0712:44 I would look forward to the next 20 years and not backward to the last 20.
The whole frontend/backend distinction did not really exist until the web. And infrastructure is definitely something that should be automated far more than it currently is. If it needs babysitting by a team of devops, you just created a lot of work rather than automating/solving it. Tedious and repetitive. It has "AI will make this a lot easier" written all over it.
So, just be ready for the ambition level to be raised for developers. Learn to build the whole system, not just bits and pieces of the system. Lean on AI to get stuff done and figure things out. It's all just code. None of it is really that hard. But it can be a lot of work if you do all of it manually.
And let's be honest, agentic tools are showing promise and great progress but they are nowhere close to independently working on existing code bases. That's not how I use them. But they are great for problem solving, debugging, prototyping, exploring some new languages and APIs, and generally taking care of more tedious coding tasks.
> I wanna pick your brain a lil. Are you saying agentic AI has helped you replace devs that you would otherwise need for your startup?
I need fewer devs to get more work done... but interestingly it has put a premium on experience because a lot of the "human work" is debugging and fixing where the LLM missed the mark. So less headcount, higher skill required.
By justanything 2025-05-104:301 reply what would someone with less or no experience do then? to be desirable?
By indymike 2025-05-170:44 Making things fast with llms.
By arrowsmith 2025-05-0712:421 reply In this case, maybe it's an acqui-hire?
By lintcollector 2025-05-0715:40 doubtful imo
By jjallen 2025-05-0712:50 Because they have users and OpenAI has seen the massive drop off in coding usage since Claude Code came out. My personal Chatgpt decline is at least 99%. It’s also 1% of their current market value. So not really a big deal.
By neets 2025-05-0818:29 It’s probably those big Fortune 500 corporate customers and getting a look inside their code bases or at least get to know their use cases
By bingemaker 2025-05-078:50 Is there a writeup or a recording. Would be nice to follow through
By shift8 2025-05-0822:55 I think it was foolish to buy it for so much money to be honest. I'm not sure how large its user base is, but that's more than likely something to do with it.
Remember that none of these tools can survive forever. Exiting was EXTREMELY smart of the founders here. Incredibly smart. I'd F off into the sunset now myself.
The reason is because they are built on top of VS Code and use Claude. So OpenAI can switch the LLM, cool, but at the end of the day there's no moat for the Cursors and Windsurfs of the world. OpenAI has the keys here because they have the proprietary LLM. This doesn't mean OpenAI will survive btw. I think Google will awkwardly win this race. They're so so so awkward though it'll take some time. It's painful to watch, but because they have the user base, they'll win. Hold that thought for a moment.
So new tools like Cursor and Windsurf will pop up all the time and do you think Microsoft will just sit by and watch? Nope. They'll update VS Code and Copilot and voila, the pendulum shift. As quickly as Cursor and Windsurf gained users, they'll lose them all again back to VS Code and Copilot. Copilot does indeed index your entire codebase - a rumor or misunderstanding by people. So as the dust settles, we'll see this change in usage. As LLMs trade places, we'll have a revolving door of fanbois and people arguing about what's better. What a rollercoaster.
What's really interesting here is that I think we're going to see a LOT of litigation. Back to Google. Look at what's happening with Google Chrome. Some genius thought they were in violation of anti-trust laws (well maybe they are). The reality is they are about to make it WAY WAY WORSE because Google Chrome was open source and should someone buy Chrome and decide they don't want to share...Well bye bye funding to virtual every other web browser. Congratulations brilliant legal system, you created a monopoly. It just wasn't Google's monopoly so I suppose that's alright.
So what I would bet is going to happen here is we're going to see OpenAI, Google, Microsoft, Anthropic, etc. all start to mess with one another here in a similar fashion. It's all going to be lobbying and legal battles. All over the place. It's going to make for an incredibly turbulent landscape. This is a very very expensive game.
THIS is why we're talking $3B. Someone is looking to protect something. It's not because of value. To think about it as a business value somewhere is wrong. Windsurf and Cursor aren't worth billions. Are you out of your mind? There's no justifiable way any rational human being would think that. When they're built on top of other tech and have absolutely no defensible position?? Heck no. It's not about their value individually, it's about their added value to these other companies. It's about bet placing. It's about protecting a larger business.
Take a moment to think what the world would look like if OpenAI must remain an open source business and or had to divest ChatGPT. They get Screwgoogled. Now ask why they're going to gobble up other businesses and why they keep raising all this money. I still think it's foolish, but it definitely seems like an existential threat that's lurking in there to me.
talented and smart folks for sure but can't not notice how much luck it is especially because its like 100% just better models. Windsurf raised a ton of money and then said they pivoted which they had millions raised to just do something completely different that likely wouldn't have been easier to raise for. Even in an interview with the cursor founder he kind of dumbly rambles that they launched and then basically lost a ton of traction until GPT4 came out. They have some core features like autocomplete but I'm struggling to see vision other than getting training data for iterative dev is a partial moat compared to just seeing commits and final code bases.
Training data is almost certainly their main reason for this acquisition. Users themselves and the models they use don't really matter. What matters is their interactions with the models. Especially if you're trying to build coding agents that will be marketed to companies for $10k a month. OpenAI is going for the industry B2B opportunity here, not consumers or end users.
But aren't they getting this data already at a much larger scale? GPT is still one of the backbones in many coding assistants, even Windsurf.
By sigmoid10 2025-05-095:11 They only get the preprocesses stuff that is sent to their api. But if you want to do complex coding tasks, you need the whole user interaction with the project and not just bits and pieces.
By bcx 2025-05-0714:08 Incredible timeline - also helpful to understand the OpenAI side.
1) OpenAI is valued at 300B (as of March 31st) https://openai.com/index/march-funding-updates/
2) OpenAI recently raised 40B from SoftBank and others.
3) Windsurf is getting roughly 1% of OpenAI's valuation.
OpenAI needs to keep moving fast to outpace MS, Google, and others -- and I think we can all agree that agentic coding is a major trend -- that is likely to keep growing really fast -- and super high leverage in that the folks doing the coding are well paid -- and more likely to be early adopters than any other field. (e.g. if openAI wants a fast way to grow beyond $20-$200/month, owning a tool like windsurf is a good move)
Some folks have been speculating the cash/equity split. I'd be confident whatever number they arrived at de-risks things for windsurf, and preserves the right amount of cash on hand for openAI.
Even if OpenAI is burning 10-20B a year, with the recent raise would buy them between 1-2 years, and given the pace of AI development that's a pretty long time.
By throw234234234 2025-05-074:541 reply 5 years ago if you said coding tools would be worth in the billions in value it would of been surprising to most people. Dev Tools were the thing you could never get a company to buy for you or were just free for most people. Interesting times.
By mike_hearn 2025-05-078:49 Dev tools are still very hard to sell (I know, I have a dev tools company). Claude Code, Aider and Codex are given away for free. What people are buying is access to proprietary general purpose models.
By ignoramous 2025-05-071:581 reply Bubble or not, given the exit, Windsurf's (Codeium) focus on enterprise sales motion has been rewarded rather handsomely: https://research.contrary.com/company/windsurf / mirror: https://archive.vn/ThWNz
By alexchantavy 2025-05-072:142 reply Yeah, in the recent Lightcone Podcast episode, Varun was talking about how they have a lean eng team but large sales org. I thought that was super interesting for a dev tool since I was expecting a dev tool to involve bottom-up sales to the dev instead of top-down sales to a leader like a CTO or VP of Eng
By conartist6 2025-05-076:501 reply It will be super interesting to see how they do against the inverse: an engineering-focused company that wants to win devs from the bottom up
By alexchantavy 2025-05-0714:36 100%. You're referring to Cursor?
By tracerbulletx 2025-05-0719:35 thats how you spend a lot of time making something great that no one pays for and everyone demonizes you if you even try
By madduci 2025-05-0710:09 It's all about stocks
By moralestapia 2025-05-0618:57 The right time and the right place, plus they did the work, ofc; but I'm sure 80% of this site has worked as hard as, or even more, than what it takes to clone VSCode.
I'm jelly. Very rarely you see in history someone lucky enough to be riding the absolute top of the wave. Even OpenAI took about decade to cook their breakthrough product.
By SwtCyber 2025-05-077:28 Totally agree - a lot of the "magic" still feels like it boils down to whoever has the best underlying model
The value is in the prompts being sent to OpenAI. Massive training depository.
Only thing better would be a social network, which supposedly they're working on.
By bufferoverflow 2025-05-073:343 reply But OpenAI already knows every single prompt sent to its models. They don't need to buy Windsurf for that.
That's a bit like saying having access to Google is as good as being Google.
All they really see as a model provider is little fragments of the picture, like trying to reconstruct the Mona Lisa by knowing which paint swatches Leonardo used.
In other words, they only saw whatever Windsurf sent as context with a "fix the bugs" prompt stapled to it.
By owning Windsurf, they see the entire source code of what's being built, all the time, plus how the model is interacting with it.
There's a massive amount of value in what happens client-side, and behind the scenes. The "director's cut" of context.
Huge difference.
So just put up together a comparable VS Code based AI IDE in a couple of months and bundle it together with the ChatGPT subscription? They'd get loads of users very fast..
By sanxiyn 2025-05-0712:30 I think it is exactly this. There is no doubt whatsoever OpenAI can do this, but they decided not to. The reason, I think, is that they don't want to be a couple of months late. In other words, they spent $3B to save a couple of months.
By NitpickLawyer 2025-05-074:37 There's much more to be gained if you also have the client side of those interaction. You can get signals from "accepted" completions/plans/etc, number of edits made to those completions, how users use context, what was passed in context from a code base, and so on.
And that's just on their models. They'd also get (at the very least) signals on their direct competition, if not straight up prompts+completions as well.
Now they also get to see what is sent to Anthropic, Google, DeepSeek, etc., and what is returned. At scale, for a prime area of concern.
By r0b05 2025-05-074:40 That's valuable user and competitor data actually.
By bufferoverflow 2025-05-074:371 reply Reread the comment I replied to. It has nothing to do with Anthropic or Google or DeepSeek.
By Mtinie 2025-05-101:20 Your comment only questioned why OpenAI cares about Windsurf from a first party perspective. I expanded the rationale for why the acquisition makes sense at a different level.
By Iolaum 2025-05-0711:14 I think part of the value is customer acquisition rather than product.
By ulfw 2025-05-0711:58 It's a beautiful world where you'll only put a little over 220 MM in and get 3000MM out mere months later.
By qwytw 2025-05-0712:00 > Incredible timeline to a $3B exit
dot-com vibes. Maybe not quite the same as Pets.com but still...
By meerita 2025-05-0712:21 Visual Studio Code Agent Mode uses whatever model you tell it to use.
By pqtyw 2025-05-0712:06 How is it different to a bunch of other apps which and tools which offer more or less exactly the same?
By dist-epoch 2025-05-0613:282 reply > I wonder how much of the value is really from the model
> The other stuff could be more or less a VS Code plugin
The other stuff would take a team 6 months to implement. This is where the valuation comes from. Time to market, they are there TODAY.
By supportengineer 2025-05-0620:092 reply 6 months of anyone's time is not worth 3 billion dollars.
By quantadev 2025-05-073:03 That was my thoughts too. No text editor is worth $3B, and probably not even VSCode is. So I think this deal was about buying more customers/users and buying "relevance". OpenAI lost it's monopoly and they're worried they might become irrelevant so they basically just purchased something popular to remain relevant.
By dockercompost 2025-05-074:22 it's not just one person though
As usual, HN misses the point. The customer list was probably worth about $2.99 billion, and the engineering work about $10 million.
By mplewis 2025-05-072:39 What makes you think $3B worth of customers were committed to Windsurf at all, much less in a sticky/exclusive way?
By pqtyw 2025-05-0712:08 > customer list
How many customers do they have? At $30 per month it would take forever to pay off even with a lot of growth.
Open AI could release an equivalent VS Code clone and make it entirely free and it would still be a lot cheaper than $3 billion.
By mjirv 2025-05-072:35 Is OpenAI having trouble acquiring enterprise customers?
I'm skeptical about this VSCode fork commanding a $3 billion valuation when it depends on API services it doesn't own. What's their moat here?
For comparison, JetBrains generates over $400 million in annual revenue and is valued around $7 billion. They've built proprietary technology and deep expertise in that market over decades.
If AI (terminology aside) replaces many professional software engineers and programmers like some of its fierce advocates say it would, wouldn't their potential customer base shrink?
Professionals typically drive enterprise revenue, while hobbyists—who might become the primary users—generally don't support the same business model or spending levels.
What am I missing here?
Part of what you're missing is that OpenAI needs to justify its own overinflated valuation. They raise money on the premise that an AI-native company can and will outcompete giant established players, so lowballing Windsurf would run counter to the narrative they're selling to their own investors.
The article also doesn't say that it's $3B in cash that OpenAI is spending. They might be giving Windsurf $3B worth of OpenAI shares - paying an inflated value for Windsurf with their own inflated value.
OpenAI just had a fundraising round that put them at $300B. Maybe they're just giving Windsurf 1% of OpenAI. Maybe they're even giving less than 1% - if OpenAI was worth $300B at the end of March and $150B last October, maybe they're worth $400B now. Maybe Windsurf is getting 0.75% of OpenAI that's "valued" at $3B.
> OpenAI just had a fundraising round that put them at $300B. Maybe they're just giving Windsurf 1% of OpenAI
That is the most hilarious maths I have ever seen, if this is true then it's maybe the biggest "holy fuck it's a bubble all the way down" I have ever seen
By tinodb 2025-05-087:28 It is very likely that such a deal isn’t fully in cash. Maybe it’s 50/50, but probably a large part will be in stocks.
By worldsayshi 2025-05-075:381 reply So they are effectively blowing their own bubble?
By conartist6 2025-05-076:58 That is what it looks like from where I sit, yes.
They built all of this assuming VSCode was a solid foundation for the next 30 years and I've completely undermined VSCode's technical foundations. Their castle is gonna sink into the swamp...
JetBrains makes $400M in revenue and is 10+ years old. Cursor is 1 year old and makes $300M in revenue.
One is going to be valued at a much higher multiple than the other.
$400M in real revenue versus $300M in annual recurring revenue (ARR) are totally different things. Real revenue is money actually earned, while ARR just multiplies one month's subscription revenue ($25M) by 12, ignoring customer churn.
Startups love flashing ARR figures because "$300M ARR" sounds impressive, but without knowing churn rates, they might never actually collect that full amount.
JetBrains however collected real $400M in a year.
By ergocoder 2025-05-0723:14 I don't think that distinction changes how much each of them is worth relatively to each other.
Achieving $300M ARR in 1 year is extremely extremely impressive regardless of churn or any other metrics really (assuming reasonable numbers). Being valued at $9B because of it doesn't seem out of line.
I'm skeptical of Cursor and not using Cursor myself. I actually use IntelliJ because I write Java.
Cursor's valuation is not unreasonable. But somehow you phrase it like $9B valuation for the fastest growing company that achieves the highest revenue per employee in the history of modern civilization is out of whack somehow.
Unless you have reason to believe the revenue is declining in recent months or will decline in near future, ARR is a better metric. last year real revenue made sense only for low growth companies.
By lolinder 2025-05-0713:00 Cursor just lost access to the extension marketplace and key proprietary plugins that they were using against Microsoft's terms, Windsurf has been eating a chunk of their mindshare, and Copilot is catching up.
That's three good reasons to believe that lots of people will be cancelling in the next months unless something changes.
By gitfan86 2025-05-0712:28 The entire reason OpenAI has a high valuation is the expectation that AI will get a lot better in the next few years. If that happens, building a clone of Cursor/windsurf should be trivial. The only reason you would buy windsurf today is to either pump up the bubble OR use it to increase your market share of developers by taking users away from claude
By anxman 2025-05-0715:24 I’m spending more on Cursor every month. Worth every penny. I’ve never given a dime to Jetbrains.
By ninetyninenine 2025-05-073:463 reply I feel jetbrains is squandering an opportunity here. Cursor is significantly easier to build then any IDE in the jetbrains ecosystem. The technology jetbrains is very hard to replicate. While the technology cursor uses should be trivial to replicate.
If jetbrains can combine there IDE technology with cursor technology, that would be ideal.
I think the problem is jetbrains tech is sort of already very biased in a certain direction and it's hard for them to pivot as fast into this new AI direction.
By mike_hearn 2025-05-078:531 reply JetBrains launched their cursor competitor a few weeks ago.
I prefer Claude Code still because it has access to more tools - Junie seems unable to fetch URLs and do other things. But that's a tiny gap that JetBrains can close quickly, and the Junie UI is quite pretty. Plus, inside the IDE they can equip the model with far more advanced tools than Claude Code will have from the CLI: inside Code Claude has to explore the codebase by banging stones together with ripgrep, whereas in the IDE it can be equipped with tools to access the indexes and navigate around like a human would.
In theory, JetBrains should be able to compete very strongly in this market. Their single line completion model is already excellent.
By pyuser583 2025-05-0713:21 I trust Jetbrains. Only company I really trust. They work for me, and have showed it again and again.
By Snakes3727 2025-05-075:03 They literally have that it is called Junie and after comparing cursor to it we settled for Junie as it does a good job with rust unlike cursor.
> If jetbrains can combine there IDE technology with cursor technology, that would be ideal.
Just give them some time, they're not stupid. I'd drop Cursor in an instant once JetBrains catches up, because IntelliJ IDEs are just a way more powerful.
By leonidasv 2025-05-0715:16 They're giving out 1 month free if you're paying for their IDEs already. I've tried it last year and it was very limited, not "agentic". Now they've launched an agentic version called Junie and also gave another 1 month free, and I've tried it again.
It's a nice improvement over the last edition, but still quite not "smart" as Cursor or Windsurf. The agent seems too shortsighted compared to competitors: it may stop looking for files or making edits sooner and you're left with code made with incomplete context (that does not work or just doesn't address your needs). It also does not fix linter/compiler errors from its own output code before finishing, unlike Cursor.
By nhumrich 2025-05-0712:47 Try out Junie
By samdjstephens 2025-05-0620:361 reply Just consider what it fundamentally is: a company at the leading edge of a product category that has found absurdly strong technology/use-case fit, and is growing insanely fast.
Looking for a moat in the technology is always a bit of a trap - it’s in the traction, the brand awareness, the user data etc.
> Looking for a moat in the technology is always a bit of a trap - it’s in the traction, the brand awareness, the user data etc.
Traction, brand awareness, and user data do not favor Windsurf over GitHub Copilot. The few of us who follow all the new developments are aware that Windsurf has been roughly leading the pack in terms of capabilities, but do not underestimate the power of being bundled into both VS Code and GitHub by default. Everyone else is an upstart by comparison and needs some form of edge to make up for it, and without a moat it will be very hard for them to maintain their edge long enough to beat GitHub's dominance.
By samdjstephens 2025-05-0621:53 Definitely take that point. But this valuation is perhaps more about how much that traction, brand and data is worth to OpenAI, who cannot buy Copilot. $3bn doesn’t seem so disproportionate in that context especially given the amount of money being attracted to the space.
By beardedwizard 2025-05-070:082 reply But copilot is bundled and is free, and it's still losing to cursor
Define losing? My company pays for Copilot but not for Cursor, and it's not at all clear to me that we're the exception rather than the norm. What numbers and data are you working with?
Copilot has every incumbent advantage, so if Cursor is doing halfway decent in the market (which it is), it's winning by default
By lolinder 2025-05-073:17 That's not actually how unseating an incumbent works. The incumbent can adapt to the threat for quite a while if they act on it, they just have to not be Blockbuster. Copilot is showing every sign of making up ground feature-wise, which is bad news for the runners up.
By walthamstow 2025-05-0714:191 reply Incumbent advantage of being in VS Code already? Thing is, Cursor is basically just VS Code, there's hardly any barrier to switching, so it's quite a weak advantage.
By milkshakes 2025-05-0720:16 the incumbent advantage is the default distribution.
defaults matter
By starfezzy 2025-05-072:53 In brand velocity maybe, but copilot is rapidly reaching feature parity with cursor and will invariably overtake it—while costing less to users.
Same with Google vs OpenAI. I tend to agree with the sentiment that I most frequently hear which is that OpenAI is the currently popular brand, but that can only carry them so far against what will eventually be a better offering for cheaper.
By supportengineer 2025-05-0620:081 reply High valuations for companies you've never heard of with no moat - it comes down to cronyism/nepotism/fraud.
By quantadev 2025-05-073:10 Yeah it seems like there's really no "adult supervision" at all in OpenAI. This purchase was a panic move. Windsurf would be worthless without the AI. Probably OpenAI knows that AI is now a commodity technology and no longer a space they can monopolize so they're just trying to get off a ship that's sinking, and find some viable path to having a tech that doesn't ultimately depend on OpenAI even having a monopoly any longer.
OpenAI needs a product team
hiring is hard
it's a high-functioning team swimming in contemporary design and eng practices
code is emerging as an important battleground
OpenAI has the $$$
By owebmaster 2025-05-0622:52 It is ironic that the company said to be cooking AGI is acquihiring software engineers because they can't develop it in-house.
By bufferoverflow 2025-05-073:362 reply I bet they can hire best minds in the world for a fraction of $3 billion.
By johntarter 2025-05-075:36 If that's so, then why is Codex such an inferior product to Claude Code? And why haven't they already built an code editor or at least VS Code extension yet?
JetBrains has been making IDE for a decade. They were the only company that actually made money by selling IDE. So I assume they have the best programmers who understand IDE.
However they fail to make a Cursor competitor so far. This alone suggests it's a harder task than meets the eye.
By conartist6 2025-05-077:16 It is, but you are assuming that only a well known IDE team would do it. To me JetBrains is the least likely to be an innovator here because they depend on their reputation for being a mature technology.
Someone like me isn't known at all but it means I have been able to experiment for a long time without pressure, which is how you do real innovation.
JetBrains as a company probably owns 10 million lines of code and it's just really hard to move fast when you're tugging that kind of ball and chain
By goodluckchuck 2025-05-0620:041 reply If OpenAI just provides AI, then the various IDEs development wrappers / IDEs / low-code etc. can collectively bargain against OpenAI for low rates. If OpenAI has an alternative, then they can charge higher rates for all plugins/ etc. and give the market an alternative.
If enterprises require fewer software engineers, where will the market for IDE development wrappers come from?
Enterprises won't require less software. If they require fewer software engineers, that would be those few engineers producing so much more software with better tools, for example, AI wrappers.
By conartist6 2025-05-077:25 Yeah but we can already see that it doesn't work like that.
If you need to write a lot of code I guess, but that's really rare, like saying "I need to write a lot of laws. I need to write 50 new laws by Tuesday with at least 15000 words of new regulation to one-up my rival legislator who wrote 40 new laws last week"
By owebmaster 2025-05-0622:54 if enterprises require fewer software engineers, medium/small companies will have access to a higher quality software engineering.
By goodluckchuck 2025-05-071:471 reply If software engineers are more effective, I would expect there to be more software engineers. They’ll put out more and better code. More code means more engineers.
The contrary view is like saying gold miners are finding more gold, and it’s easier than ever, so we expect folks are going to leave town.
If your assertion was true, we would see a hiring boom across the board, instead of mass layoffs and hiring freezes throughout our industry
By camdenreslink 2025-05-074:111 reply LLMs aren't the cause of mass layoffs and hiring freezes. The end of ZIRP, uncertainty in the macro and offshoring are the cause. AI is just something executives like to say recently when they do layoffs ("we'll be more efficient with cutting edge technology!").
By conartist6 2025-05-077:36 I think there's real pressure from investors to show that some of your human costs will be going away.
After all most of those investors are deeply invested in AI technology already. At the valuation, they need to be able to show that it replaces human workers because that's the specific kind of greed that is driving the value of the stock.
And if you see your competition tighten their belt then you should tighten yours right? So without proof companies are acting like they can use a small number of human-ai hybrid workers. There's strong peer pressure to think that way as a direct result of AI
By ClarityJones 2025-05-0716:20 That's fair, but enterprises are often naive and prone to groupthink.
It was just a few years ago when automakers and rental car companies unanimously decided (has they had been told to decide) that COVID-19 would reduce demand for cars. They cut production, sold off fleets, and almost immediately found themselves unable to keep up with demand.
By nailer 2025-05-079:34 Someone, maybe it was Duolingo basically said: medium stuff is now easy, hard things are now expected of you.
By arthur-st 2025-05-0620:09 They have a healthy enterprise customer base, and an engineering team that clearly knows how to work with power users (which OpenAI is bad at).
By shortrounddev2 2025-05-0713:06 > What am I missing here?
That AI is in a bubble akin to the crypto craze from a few years ago, and the valuation of these companies is divorced from their underlying business fundamentals
By globnomulous 2025-05-0714:151 reply > If AI (terminology aside) replaces many professional software engineers and programmers like some of its fierce advocates say it would, wouldn't their potential customer base shrink?
This is such a good point. The best reply available to the AI hype-men would probably be that LLMs "democratize" coding and therefore that even more people will use IDEs in the future, but that sounds like BS to me -- not unlike AI/hype itself.
By bwfan123 2025-05-0714:30 indeed, and that is why you see adobe declining, because, their customer base is shrinking even as they add AI into their tools.
By __loam 2025-05-072:07 Well you see Jetbrains is a European company unlike the super special boys running an inherently more valuable American company.
Steel man: Windsurf own the customer relationship. The models are just generic interchangeable services they use for processing.
Realistically: I don’t know how many users windsurf actually has and I never actually met anyone that uses them. Whereas Cursor AI took a huge percentage of the VS code users I know in real life.
By seunosewa 2025-05-0717:10 I use Windsurf. It had the smoothest agentic experience when I subscribed. I think still does.
Cursor purports 200m in projected yearly revenue. With some months having 40% month over month growth. The trajectory is vastly different.
Whether or not it's justified is a different matter, but for startups valuations are more about potential then current performance.
Cursor purports $300M in annual recurring revenue (ARR) but stays silent on churn.
They made $25M from subscriptions one month, took that number, multiplied it by 12, arrived at $300M and everyone has been running with that line without ever asking what their churn looks like.
They could have churned $24M the next month, ask yourself why they are silent on churn if they are doing so well.
By johntarter 2025-05-075:331 reply Venture capitalists aren't ignorant, their business revolves around knowing exactly what churn is. Cursor has raised $1 billion with a $9 billion valuation. VC's willing to put in that much money has looked at their data and knows what the retention rate is.
By mrweasel 2025-05-076:33 If their plan is to make their money back selling the company, then they don't care about revenue or retention rate. The company just need to look like it might be doing well.
No, venture capitalists aren't ignorant, but their goal also might not be to build and run a healthy company long term. It might be to turn a quick profit by selling a startup to another company.
By hodder 2025-05-0717:28 "I'm skeptical about this VSCode fork commanding a $3 billion valuation".. Nothing to be skeptical about. The market has spoken. It was worth 3b to OpenAI. Companies arent worth a vague notion of what "value" someone in an armchair thinks they might be worth, they are worth what people are willing to pay, and OpenAI paid.
By TiredOfLife 2025-05-0620:051 reply One example is that VS Code Copilot autocomplete is still behind what Codeium (now Windsurf) was 1.5 years ago.
By animitronix 2025-05-0717:03 They have no moat, Cursor does the same stuff. Microsoft's moving to kill all of these anyway and has added agent mode to copilot.
OpenAI would have gotten more value by setting that 3 billion on fire, at least it would have powered the data center for a little while.
By quantadev 2025-05-073:06 It's about popularity. OpenAI lost their monopoly now that there are many competitors so they're just trying to make a move to purchase "relevance". They're just trying to buy their way into the cool kids club, to remain relevant to at least a large number of kids.
By empath75 2025-05-0714:23 > when it depends on API services it doesn't own
It now owns the API services.
By XCSme 2025-05-0715:05 OpenAI buying a company that is dependent on their competitor.
By ninetyninenine 2025-05-073:491 reply Yes. That's the problem. You think the answer is no, but the answer is actually yes.
Could you elaborate? Power saw operators replaced traditional carpenter?
By roflyear 2025-05-0716:32 You can't really make a living anymore being a furniture maker. Even semi-famous people in the industry have a hard time doing it. Only a few make enough to feed their family.
Making cabinets, etc.. sure. But woodworking has drastically changed, and maybe programming is changing that way, too.
By ninetyninenine 2025-05-0716:051 reply Of course any tool that makes a job easier means that less people are needed to do the same job. If demand doesn’t change the supply will naturally shrink.
So hypothetically 1 man can cut wood but it takes him 2 days to do a big job. With a power saw it takes him half a day so his output on this section of the job is amplified by 4x. Any tool that makes his life more trivial increases his output and therefore increases the supply of the product without touching demand. With an over supply the system will naturally lower in supply by replacing carpenters.
This happens for anything and any tool that makes someone’s occupation easier. You have to think in aggregate. It may be the increase is imperceptible as it only increases the efficiency of a worker by 1 percent which is nothing but in aggregate that translates to a 1 percent reduction in the work force. Of course reality is more complicated than that but I hope the example shows you what I’m saying.
And it gets even more complicated than this too because increasing supply can also increase demand because the product becomes cheaper. Or demand may have already been astronomically high so the increase in supply only meets the demand.
In general if the product is in equilibrium of supply and demand and you increase the efficiency of the worker producing the supply then you will reduce worker population because the job doesn’t pay well enough anymore and people leave or less people join. The system slowly comes back to equilibrium or it can oscillate back and forth between over supply and undersupply as it’s basically a control system. This is what’s been happening with software for the past 3 decades.
The idea that the power saw didn’t replace a carpenter is flat out wrong. The story is much more complicated than that but the reality is that in general it did replace some carpenters just like how vibe coding for sure is replacing some software engineers.
By kbelder 2025-05-0720:53 You're right that it may have, and you're right that it's hard to quantify. But it is thoroughly possible that the increased productivity heightened demand. The ability to create more or better output for the same amount of labor can make some production feasible that wasn't before.
After all, in net, increased production has allowed us to have more. We aren't making do with the same amount of stuff and spending less. We're spending more, and receiving much more. That money is going to other people's pockets.
