In a strategic move to bolster its AI ambitions, Alphabet’s Google has recruited key personnel from AI code-generation startup Windsurf, the companies revealed on Friday. The deal comes shortly after OpenAI’s failed attempt to acquire the startup.

Google will pay $2.4 billion in licensing fees to access Windsurf’s technology on a non-exclusive basis, according to an insider familiar with the agreement. The arrangement does not involve Google taking an ownership stake in Windsurf.

Windsurf’s CEO Varun Mohan, co-founder Douglas Chen, and select members of its R&D team will transition to Google’s DeepMind division, focusing on agentic coding projects, particularly the Gemini initiative.

“We’re thrilled to bring aboard exceptional AI coding talent from Windsurf to Google DeepMind to accelerate our advancements in agentic coding,” Google stated.

The deal follows months of negotiations between Windsurf and OpenAI, which explored a potential $3 billion acquisition, underscoring the surging demand for AI-driven code-generation tools, sources told Reuters in June. OpenAI could not be reached for comment.

This unconventional deal benefits Windsurf’s investors, who have poured $243 million into the company, including funds from Kleiner Perkins, Greenoaks, and General Catalyst. Valued at $1.25 billion a year ago per PitchBook, Windsurf’s backers will gain liquidity through the licensing fee while retaining their shares.

The Rise of ‘Acquihire’ Deals

This move aligns with a wave of similar arrangements in the AI sector. In March 2024, Microsoft secured a $650 million deal with Inflection AI to license its models and hire staff, while Amazon recruited Adept’s co-founders and team in June. Meta also acquired a 49% stake in Scale AI in June, marking a significant example of these hybrid partnerships.

Unlike traditional acquisitions, these deals avoid U.S. antitrust scrutiny by not involving controlling stakes, though regulators may investigate if they suspect efforts to sidestep competition rules. Several such deals are currently under review.

As tech giants like Alphabet and Meta vie for AI dominance, they are increasingly pursuing high-profile talent and acquisitions, offering substantial compensation packages to secure top expertise.

Windsurf has appointed Jeff Wang, its former head of business, as interim CEO, with Graham Moreno, vice president of global sales, stepping into the role of president. Most of Windsurf’s 250 employees will stay with the company, which plans to focus on innovating for its enterprise customers.