In a new Business Insider feature exploring the fallout from Windsurf’s broken deal with OpenAI and its unusual licensing arrangement with Google, Alpha Partners Founder and Managing Partner Steve Brotman weighed in on a larger trend reshaping the startup ecosystem.
“This isn’t a one-off, it’s part of a broader pattern where big tech hedges its bets,” said Brotman. “Licensing is faster, cheaper, and less political than full-on acquisitions, especially in an environment where regulatory scrutiny is intense.”
The article chronicles how Windsurf, an AI coding startup once poised for a $3 billion acquisition by OpenAI, ended up splitting the company in two. Its CEO and top engineers were scooped up by Google for $2.4 billion in exchange for licensing the company’s IP, leaving many employees with little to show for their work. The remaining business was later acquired by Cognition.
Deals like these, where large tech companies opt to acquire talent and license IP rather than buy entire companies, are becoming more common in AI. Similar transactions involving Character.AI, Scale AI, and Inflection illustrate how big tech is sidestepping full acquisitions to gain strategic capabilities quickly and quietly.
While such deals offer speed and flexibility, they can leave employees and investors in a bind. Critics say the new model undermines the startup social contract where early employees sacrifice cash for equity with the promise of future upside.
At Alpha Partners, we focus on supporting growth-stage companies and founders who are building long-term value, not just short-term liquidity events. As the structure of exits evolves, so must the expectations and protections for everyone involved.
When licensing replaces M&A, speed comes at a price, and it’s often paid by those left behind.
Read the full article here.
