Windsurf x Google x Cognition: Full Breakdown: Who Made Money, Who Did Not

Windsurf was hopeless before this deal. You could never attract 30 S-tier developers to fix Windsurf, but they fixed it in one hour. Literally, in 90 days, Windsurf could be better than it was before this deal. This deal is crazy, it sounds, because they have the people. Some of these deals almost seem too cheap. If you look at the crappy multiples we see for some startups, undifferentiated company raising at 300 pre, with less than a million in revenue. And then you see, what is Windsurf, uh, selling for? 20X revenue? Lovable's raising at 20.

Ready to go? (upbeat music plays) Guys, I am so excited for this. I literally have been looking at the news over the last few days going like, "Ah, when's this show? When's this show?" Uh, so, uh, what else would we fricking start with? I would love it if we went with a different topic to start with. (laughs) But on Friday, I think it was, Windsurf announced and Varun announced that there would be an agreement with Google whereby the IP and the team would be joining Google, uh, and DeepMind, and they announced that on Friday. And so if we just start there, how did we break down, how did we assess, how did we think about that news of the core team and the IP going to Google?

Here's a framing comment. So, um, the, the, the memo that Cognition sent to its employees was that they were buying an $82 million ARR business, okay? And it'll be interesting to see what they paid for it, because, you know, not much probably, right? So that sounds very exciting, right? It's, it se- And I do think Cognition got an amazing deal, but here's the framing question. And again, so many AI folks stretch reality when they quote revenue numbers, okay? But Windsurf said like 60 days ago, uh, 90 days ago, before the, before, uh, before the OpenAI deal was announced and before they lost access to Claude, that they were doing 100. 100. So did they decel- If they decelerated from 100 before the OpenAI deal to 82 million today, that's a lot of deceler- I would take any deal. And I, I think that may explain a lot of it, right? The minute... If you, if you're decelerating li- that level, the minute the OpenAI deal falls apart, you've gotta find a lily pond to jump on, don't you? That's massive deceleration if it's accurate.

I think it's clear they ha- they wanted to find a lily pond. But again, zooming out, it is just worth restating the kind of, the cast of characters here, 'cause literally this is one of those Agatha Christie mo- mysteries where anyone could have killed th- you know, anyone could have killed the victim, right? Stepping back, three months ago, OpenAI said they were gonna buy this company, or at least intimated they were going to buy this company. It sounds like some combination of Microsoft and the FTC prevented them from buying this company. In the meantime, Anthropic mugged this company by taking away access to their API, which is how this company delivered its product. Then, as you say, on Friday, Google stepped in once the exclusive period was gone and bought part of this company, leaving an empty husk, and then on Monday, Cognition bought the empty husk and got, you know, general all around Silicon Valley cute ohs and plaudits for stepping up and being a good buy, board buy. That's a lot. That's a fricking saga start to finish. And you know, it's almost like you gotta unpick it bit by bit and figure out all the... There's a c- genuine comment here. Almost everything you need to know about the AI revolution is embedded somewhere in this kind of play, because all the characters are playing, are all doing their thing, and there's just a lot in it.