It has been over a week since Windsurf founders Varun Mohan and Douglas Chen left the company to join Google DeepMind. Since their departure, a fresh debate has started over whether it was morally right for them to walk away from the company.

Notably, both founders joined the AI research laboratory along with some key R&D employees on July 11, while the rest of the company was acquired by Cognition on July 14. The company did not disclose the acquisition amount. 

Mohan’s decision to leave shortly after the collapse of a potential $3 billion deal with OpenAI has been interpreted by several industry leaders as prioritising personal opportunity over the interests of the wider team.

Taking a strong stance, venture capitalist Vinod Khosla said, “Windsurf and others are really bad examples of founders leaving their teams behind and not even sharing the proceeds. I definitely would not work with their founders next time.”

Notably, Khosla is an investor in Cognition, the AI startup that acquired parts of Windsurf. This connection has added another layer of complexity to the debate.

On the other hand, Scott Wu, co-founder of Cognition, said that traditionally, “there’s an unspoken covenant that as a founder one goes down with the ship”, which he finds “a bit disappointing”. Nevertheless, he admitted that this norm is changing now.

When asked if deal structures like the one between Windsurf and Google could become the new norm, Wu acknowledged their novelty but didn’t say if the shift would persist. 

On the broader trend of aggressive talent acquisition by companies like Meta, Wu offered a contrarian take. “Maybe controversial…but I actually think it’s quite reasonable.”

Y Combinator CEO Garry Tan defended Mohan and the Windsurf team, saying they “built something great” and deserved more credit than criticism. 

According to Tan, over 40 founding engineers walked away with seven-figure payouts. The rest of the 200-person organisation included only 15 engineers who had joined within the last year, with the majority working in sales and operations. He added that the company still had enough cash to potentially compensate the remaining team if it had chosen to shut down and distribute it.

Tan revealed that Mohan preserved $2.3 billion in value for investors and the vested cap table, doing his best under intense time pressure. He argued that the founders shouldn’t be criticised online and expressed confidence that “their decision to sell will be vindicated”.

Tan added that the money was enough to financially compensate the remaining employees or stakeholders, possibly even generously, if the remaining team had agreed to distribute the cash as dividends and shut the company down.

Windsurf told AIM that it will continue to operate independently, while Cognition remains focused on supporting its existing customers. “As the partnership evolves, both teams will begin integrating capabilities, with Windsurf continuing to build its product from within Cognition and staying committed to its fast-growing community, as seen in our recent Wave 11 feature launch,” the company said.

The company added that employee sentiment is quite positive after July 14’s announcement and terms.

“I think this is not a bad end outcome at all. The founder and a few core staff get to build big things at Google, while the rest of the Windsurf is still protected as a brand by Cognition, who wish to continue building on it,” Vishnu Ramesh, founder of Subtl.ai, told AIM.

Notably, he recently shut down his company after struggling to find the right market fit.

He added that valuation is not everything. “You could sell a product for a really high valuation, just to see the acquiring company run it to the ground. What matters here is only how the founders and team feel about it,” he said. 

Windsurf’s interim CEO, Jeff Wang, offered some behind-the-scenes insight in a post on X, describing the past week as “mildly crazy” and acknowledging the challenges faced by the founders. 

“Varun and Douglas were great founders, and this company meant a lot to them,” he wrote. “It’s important to recognise that this situation must have been difficult for them as well.”

He shared that on July 11, the leadership had to deliver a shock. “The mood was very bleak,” Wang said, adding that employees were in tears and enquired if the company could distribute the remaining funds immediately. 

What Happens to Windsurf Employees 

Despite the turmoil, Wang said he remains focused on finding a path forward. “We still had all of our IP, product and strong talent, including an excellent GTM machine.”

He revealed that the turning point came on July 11, when Cognition co-founders Wu and Russell Kaplan reached out to discuss a potential deal. Within 24 hours, serious negotiations were underway. “We quickly brought in lawyers to review the letter of intent and signed that day, a little over 24 hours after Scott’s cold outreach,” Wang said.

While other acquisition offers continued to come in, Wang said Windsurf’s leadership concluded that Cognition was the right long-term partner. The deal was structured to support employees by including accelerated vesting, waived cliffs and payouts across the board, an outcome considered more favourable than all previous options.

“The other priority during this process, which Scott and I aligned on and was one of the things that helped me realise he was the right partner, was that we needed to take care of all Windsurf employees. Their work and talent had gotten us to this point; they deserved to be paid for that, and we wanted to give them a better price than any of the previous scenarios,” Wang said.

Windsurf’s example will likely be remembered for a long time in the tech industry, where founders are exploring new paths to exit. Whether their’s becomes the new norm or a cautionary tale remains to be seen, but it’s clear that the rules for founders are being rewritten in real time.

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