Why AI Founders Keep Betraying Startups for Big Tech Money

Instead of building their own startups, many engineers in India would rather go and join a big tech company to work with a lucrative package that comes without the stress of raising funds, often at the cost of missing out on building something truly revolutionary. This even holds true for the most talented founders of Silicon Valley, and Varun Mohan, CEO of Windsurf, is just one such example.

Windsurf was envisioned as an AI code editor that could rival, and possibly even beat, Cursor. The startup was gaining traction, backed by a small but dedicated team, and early buzz suggested an OpenAI acquisition that could have cemented its place as a leading AI tool. 

However, everything changed overnight. Mohan left for Google with no formal announcement or explanation to the team. The OpenAI deal collapsed within days. 

Google stepped in with a $2.4 billion licensing agreement for Windsurf’s IP and hired both Mohan and co-founder Douglas Chen to strengthen Gemini’s coding capabilities. 

The company that once brimmed with promise was suddenly left hollow. A few days later, Cognition Labs stepped in to pick up the remnants. While the founder walked away with a high-ranking position at Google DeepMind, the team stayed behind to deal with the wreckage.

What happened at Windsurf is not an outlier; one can say it’s an industry norm. The AI talent war is feeding itself. As Meta offers $100 million signing bonuses to former OpenAI researchers, OpenAI retaliates by poaching engineers from Meta, Tesla, and Google.

It has become the new blueprint for AI exits. 

No Scaling Anymore

Founders are now cashing out through what insiders are calling “reverse-acquihires”. It’s a playbook that is as simple as it is ruthless. Big Tech avoids acquisitions that might trigger regulatory scrutiny by licensing IP and hiring key talent, leaving the rest of the company behind. 

Earlier in June, Scale AI followed a similar trajectory. Once considered a generational company, Scale became a cautionary tale when its CEO, Alexandr Wang, decided to join Meta. Meta invested $14.3 billion to acquire a 49% stake in Scale and brought Wang on to co-lead its newly formed Superintelligence Lab. 

What should have been a milestone moment quickly unravelled. Within weeks, Scale’s biggest clients—Google, Microsoft, and OpenAI—began cutting ties. 

Internal emails revealed that customers feared Meta might gain indirect access to proprietary data. Thousands of Scale’s client documents were later found exposed through public Google Docs links. The company, stripped of its leadership and surrounded by distrust, began to fall apart.

Notably, Inflection AI’s downfall last year was also just as swift. Microsoft structured a deal that paid $620 million to license Inflection’s IP and added another $30 million to waive legal complications tied to poaching the team. 

Co-founders Mustafa Suleyman and Karén Simonyan joined Microsoft to lead its new consumer AI division. Inflection, once viewed as a flagship startup for personal AI assistants, now operates as an API tools studio with only a dozen of its original 70 employees remaining. 

A person familiar with the transition said, “The product no longer exists in any meaningful form. The heart of the company was gutted in a week.”

No Going Back

The same cycle played out at Adept, Character.AI, and several others.

Amazon hired Adept AI’s CEO, David Luan, and his core team to head its AGI efforts, once again avoiding a full acquisition. 

Google brought back Noam Shazeer from Character.AI through a similar licencing arrangement. 

The result is always the same: the startup remains in name alone, not in function. The core talent—the real asset—moves on.

Founders defend these decisions by pointing to the scale and reliability of Big Tech infrastructure. Suleyman said he joined Microsoft because it gave him access to “reliable Azure clusters they could never build themselves”.

But this access comes at a cost. Startups are being drained of their most valuable assets—their teams, their trust and their momentum.

Engineers and early employees are learning the hard way that equity doesn’t necessarily mean protection. Contractors at Scale described how their pay was delayed after the Meta deal. Others reported being shut out of internal systems overnight. 

“We went from building something we believed in to being told to sit tight while the founders walked away,” a former engineer said.

Investors are feeling the blow as well. Reports suggest Inflection’s backers walked away with returns of just 1.1 to 1.5 times their investment—a fraction of what an IPO or full acquisition might have yielded. 

Meanwhile, founders walk away with nine-figure personal windfalls. Wang’s personal stake in Scale is now estimated to be worth over $5 billion. For VCs, the lesson is that retention clauses mean everything. Without them, the only asset left might be the logo.

The situation has raised alarms among regulators. The US Federal Trade Commission and the UK’s Competition and Markets Authority had opened investigations into the Microsoft-Inflection and Amazon-Adept deals, arguing that such talent raids may constitute de facto mergers. 

A US senator recently called the practice “a straight-up poach designed to sidestep merger law”. Yet, so far, nothing has changed.

This is what the AI boom looks like under the hood. A team builds a product. The hype builds. Big Tech steps in. The founder exits. The company vanishes. The ecosystem moves on, but not everyone does.

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