Windsurf, With CEO Varun Mohan, Faces Cursor and Other Startups Automating Code

OpenAI’s reported $3 billion purchase of Windsurf implies quick, big gains for General Catalyst, Kleiner Perkins, and co-founder Varun Mohan

June 19, 2025

Last week, Windsurf released a new version of its coding assistant, powered by artificial intelligence (AI), which helps software developers write code, answer questions, and improve productivity.

The version includes a tool to measure the percentage of code attributed to using Windsurf compared to that created by a human developer. The goal is to “have a metric that our customers can trust as a good directional proxy for productivity that we at Windsurf can only improve by improving the product, not by any fudging,” according to a blog post on the company’s website.

Mountain View, California, based Windsurf combines ChatGPT tools from OpenAI and generative AI models from other vendors with its deep learning software. It describes its mission as empowering “developers to dream bigger” by automating “too many parts of the traditional coding workflow that are boring, tedious, or downright frustrating.”

Customers should expect the percentage of code created by Windsurf to be more than 85%, compared to the 30% to 50% from competing models. This is because, a company blog states, the software uses AI agents while those of competitors do not.

AI agents are software systems that use AI to pursue goals and complete tasks on behalf of users, according to a Google Cloud blog post. Agents show reasoning, planning, and memory and have a level of autonomy to make decisions, learn, and adapt.

An AI agent’s capabilities are made possible in large part by integrating generative AI and AI foundation models. As a result, AI agents can simultaneously process text, voice, video, audio, code, and other information and can converse, reason, learn, and make decisions. They can learn over time and facilitate transactions and business processes. Agents can work with other agents to coordinate and perform more complex workflows.

Cursor, a Windsurf competitor, also uses AI agents in their software which automates coding. Cursor’s founders wanted to build a platform which autocompleted code as well as understood what the developer was trying to do. They asked: "What if we could make coding feel more like thinking?"

San Francisco based Cursor’s clients include NVIDIA, Uber, Adobe, Johnson & Johnson, Perplexity, and Samsung. The startup was founded in 2022 by Michael Truell, Sualeh Asif, Arvid Lunnemark, and Aman Sanger, who met while studying at the Massachusetts Institute of Technology (MIT).

In 2021, Varun Mohan and Douglas Chen co-founded Windsurf, initially naming it Codeium. They were friends in middle school in Sunnyvale, California, and later classmates at MIT.

At first, Windsurf pursued a couple of other products. One of them was an AI infrastructure offering, which was profitable. But the founders abandoned the business upon realizing that generative AI would soon make it a commodity product.

(Image: Courtesy Creative Commons)

Prior to Windsurf, from 2018-21, Mohan worked, including as a software engineer. at Nuro which is building an AI driver for automotive and mobility applications. He was an intern at Databricks, Cloudian, Quora, Cloudera, LinkedIn, Samsung, Stonybrook University, and the University of California, Santa Cruz, (2013-18).

Mohan, 29-years-old, earned a MEngg Computer Science, 2017, and a Bachelor’s in Electrical Engineering and Computer Science, (2014-2017), both from MIT. He graduated high school from the privately-run Harker School, in San Jose, California, where he competed in math and computing Olympiads. He grew up nearby in Sunnyvale, California. His parents are immigrants from India.

Windsurf co-founder Douglas Chen was a machine learning engineer at Meta, parent of Facebook, 2019-21. He earned a BS in Computer Science and Engineering, with a minor in Math, from MIT, 2014-2017.

Mohan is Windsurf’s Chief Executive. The startup is seeing rapid growth in demand; early this year, it reportedly had a run rate of more than $40 million in annual recurring revenue. It has raised $243 million in total funding, starting with a $3 million initial seed round in January 2021, and $150 million, in its last round in August 2024, at a valuation of $1.25 billion. Investors include leading Silicon Valley venture firms General Catalyst and Kleiner Perkins.

Last month, OpenAI agreed to purchase Windsurf for $3 billion, according to Bloomberg. San Francisco based OpenAI and Windsurf have not publicly commented on their reported agreement. OpenAI’s ChatGPT and other tools compete against those from Microsoft while a major Windsurf competitor is GitHub, which is owned by Microsoft.

Like Windsurf, San Francisco based GitHub sells AI tools which automate the building, scaling, and delivery of software. GitHub’s platforms are used by more than 150 million developers at more than four million organizations, including 90% of the Fortune 500 companies. Apparently, OpenAI’s strategy is to try and attract and retain more users and developers on its platforms by integrating its AI models with Windsurf’s software.

Microsoft has a market value of $3.6 trillion while OpenAI has a valuation of $300 billion. In 2018, Microsoft bought GitHub apparently to help identify, anticipate, and tackle emerging competitive threats to its software businesses. Microsoft paid $7.5 billion in stock for GitHub - $38 billion at its current stock price.

Apparently, Microsoft and other major software vendors view Windsurf and Cursor as a threat to their high profit margin, multi-billion-dollar software products. In fact, the startups are taking direct aim at the established software vendors. Enterprises should explore if AI tools can enable their domain specialists to build custom software solutions for specific needs instead of paying large sums for software as service products, Windsurf co-founder Varun Mohan told Lenny’s Newsletter.

Cursor is also growing rapidly, currently at a run rate of more than $500 million in annual recurring revenues. Last week, Cursor raised $900 million in a funding round at a valuation of $9.9 billion, more than triple the reported purchase price for Windsurf. Venture investors in Cursor include Andreessen Horowitz, Thrive, and Accel. Early this year, OpenAI was unsuccessful in its attempt to buy Cursor, CNBC reported.

The eager interest of major Silicon Valley venture capital firms to fund Cursor, Windsurf, and others is not surprising given that the startups are pursuing huge potential markets. For instance, Windsurf states on its LilnkedIn profile that it is “rewriting the future of software development.“ In 2024, global software sales totaled $736 billion. In addition, getting developers to use a platform means additional revenues from storage and other cloud-based services. The global annual market for cloud storage and related services is estimated to be $160 billion.

Given the massive potential markets, it is also not surprising that the field is crowded with competitors: big vendors include Google and Amazon, in addition to Microsoft and OpenAI; and there are several dozen startups including Tabnine and GitLab, besides Windsurf and Cursor.

In a conversation with Lenny’s Newsletter, Wndsurf’s Mohan said enterprises should start using AI tools immediately because the competitive advantage gap between AI tool users and non-users will dramatically widen in the next year.

Meanwhile, if OpenAI did purchase Windsurf for $3 billion, General Catalyst, Kleiner Perkins, and the other venture investors have made huge financial gains - including 240% in less than a year on the funds invested in the last funding round in August 2024. And, based on estimates of shares owned by founders at funding rounds similar to Windsurf, co-founders Varun Mohan and Douglas Chen could each be paid more than $300 million for selling their startup.