The tech world was abuzz when Google acquired Windsurf for a staggering $2.4 billion, licensing its technology and poaching its top talent. While the deal was a financial boon for some, it left a bitter taste in the mouths of many Windsurf employees and raised concerns among Silicon Valley founders.

The acquisition saw Google pay Windsurf in two equal parts, with $1.2 billion earmarked for investors and the remaining half as compensation packages for around 40 Windsurf employees. A significant portion of this sum was allocated to the startup's co-founders, Varun Mohan and Douglas Chen. This transaction proved lucrative for venture capitalists, including Greenoaks, Kleiner Perkins, and General Catalyst, who saw a 4x return on their investments.

Despite the impressive returns, many investors had hoped for an even larger payout. TechCrunch reported that Kleiner Perkins was in talks to lead a new funding round, valuing Windsurf at $2.85 billion. However, the deal fell through when Windsurf agreed to be acquired by OpenAI for $3 billion. The OpenAI acquisition ultimately unraveled, paving the way for Google to step in with a deal that offered investor returns without acquiring stock.

The Google deal was a double-edged sword for Windsurf employees. While it was a win for co-founders and VCs, it left many of the company's 250 employees out in the cold, particularly those expecting a payout from the sale to OpenAI. In a typical acquisition, employees would receive money for their shares and have their vesting schedules accelerated. However, Windsurf employees hired in the last year did not receive a payout from the Google deal.

The deal was especially unsettling for the approximately 200 Windsurf employees not hired by Google. Instead of pocketing the entire $2.4 billion, investors opted to leave the company with over $100 million in capital. While some sources claim this was entirely funded by VCs, others say the founders contributed equally to the nest egg.

The remaining leadership faced a dilemma: distribute the funds to employees and risk running out of cash to operate, or keep the money and face backlash for not sharing the wealth. The difference of opinion surrounding this issue contributed to the deal's controversy.

Adding fuel to the fire, some employees Google did hire saw their stock grants revoked and vesting timelines restarted, meaning they would have to wait an additional four years for their total payout in Google stock. Top VCs, including Vinod Khosla, condemned the co-founders for not sharing their windfall with the team that helped build the company.

In the aftermath of the Google deal, Windsurf's remaining entity, led by interim CEO Jeff Wang, managed to sell itself to Cognition. The acquisition allowed every employee to financially gain from the sale, according to a blog post by Cognition. TechCrunch estimates that Cognition paid $250 million to acquire Windsurf's remaining entity.