What Windsurf and Scale AI Quasi-Acquisition teaches us
Top AI talent costs $200M per person
It's been about a year since I unpacked Big Tech's quasi-acquisitions of generative AI companies like Inflection, Adept, and Character.ai. In that piece, I broke down why these deals—structured as talent hires plus non-exclusive licenses rather than full mergers—made sense amid regulatory pressures, high competition, and the need for quick access to talent, datasets, and infrastructure.
I also incorrectly predicted the trend might not endure as scrutiny mounted. Well, the trend has not only continued but evolved with more complex hybrids. Two fresh examples: Meta's $14.3 billion investment in Scale AI and Google's $2.4 billion licensing deal with Windsurf.
In this update, I'll cover recent developments with an updated deals table, how they align with last year's patterns, key differences and insights, per-head fee calculations ($100M/head), and a measured take on employee outcomes. Here's an updated version of the table from my 2024 piece, incorporating the completed quasi-acquisitions.
Details of what happened: How Windsurf & Scale AI deals follow and differ from previous patterns
These new transactions echo the quasi-acquisition playbook I outlined last year: Big Tech pays premium fees for talent and tech access without full ownership, bypassing heavy regulatory reviews while delivering returns to investors. Here's how they align:
Avoiding Standard Acquisition Structures: Just like Microsoft-Inflection or Amazon-Adept, both deals sidestep Hart-Scott-Rodino (HSR) Act filings by not crossing "control" thresholds. Meta's 49% non-voting stake in Scale keeps it below 50%, classifying as an "equity investment" under ASC 323—mirroring how non-exclusive licenses in 2024 deals avoided asset-transfer triggers. Google's Windsurf agreement is pure licensing, with no equity, echoing Character.ai's structure.
High Rewards and Competition Driving the Deals: As I noted, the AI arms race demands speed. Meta gains Scale's data-labeling tech for Llama models, much like Amazon accessed Adept's datasets. Google outbid OpenAI for Windsurf's technology, securing a competitive edge—intense rivalry I predicted would fuel more such moves.
Investor Returns via License Fees: These ensure VCs get multiples without blocking deals. Scale investors (e.g., Accel) saw ~2x returns on the $14.3B investment, similar to Inflection's 1.1-1.5x. Windsurf's $2.4B fee provided ~1.6x on its ~$1.5B valuation, aligning with my point that fees compensate for lost independence.
Access to Key Assets: Beyond talent, fees buy datasets and infra. Meta licenses Scale's vast labeled data, akin to Inflection's 22,000 GPUs.
While following the core patterns, these 2025 deals introduce twists that reveal evolving strategies—hybrid elements and more transparent (yet still limited) disclosures. This gives us deeper insights into Big Tech's adaptability.
Hybrid Structures for Partial Control: Unlike 2024's pure licenses, Meta-Scale blends investment with integration. The $14.3B gets a stake that lets Meta influence without full ownership. This differs from Inflection's clean split, providing "effective control" via board seats (Wang joins Meta AI leadership while retaining Scale board control).
Increased Scale and Bidding Wars: Fees are bigger: $14.3B for Scale dwarfs Inflection's $650M, reflecting AI's maturation. Unlike 2024's quieter negotiations, these had public rival bids, per reports—highlighting how competition inflates costs but accelerates consolidation.
How much does Big Tech value top AI talent? The $100M headline number
A key metric I touched on last year was cost justification via talent. Let's quantify with per-head calculations, using data from disclosures and reports The denominator is strictly the number that moved to the buyer. Amazon and Microsoft look “cheap” relative to Google and Meta. Since Meta’s acquisition included an equity stake, we attribute 14% of the $14.3B to the ~10 employees who joined Meta. 14% is to reflect the recent 14% layoff by Scale - though arguably 14% is conservative because many of Scale’s top customers are moving most of their business away.
What these deals mean for startup employees
On average, the cost per AI talent acquihired is $59 million. Unfortunately, most of that money goes to the investors. Employee experiences from acquired companies have been mixed—often providing financial and career upsides for those poached by Big Tech, but with disruptions like uncertainty or layoffs for others.
For poached talent: In Scale, ~10 top staffers transitioned to Meta with enhanced packages, including access to vast resources. One engineer posted on Reddit: "It's a step up—better pay, stability, and impact at scale." Windsurf's ~30 hires to Google received packages worth double their equity value, with immediate signing bonuses; many signed on-site during a secretive July 11 meeting. Similarly, Inflection's ~70 staff joined Microsoft with competitive comp, including equity equivalents and Adept's ~66 to Amazon got higher salaries (~$300K+ base for engineers).
For those not poached: Outcomes varied. Scale laid off 14% (~200 employees) post-deal, citing "restructuring for efficiency" after missing projections. Windsurf's remaining ~120 staff initially felt "abandoned" after Google's selective hire, with frustration over non-accelerated vesting —but Cognition's July 15 acquisition waived vesting cliffs and ensured financial participation for all, turning uncertainty into a "great outcome" per Windsurf CEO Jeff Wang.
Overall, these deals cushion transitions for many via Big Tech's resources, but remnants face flux—layoffs or pivots, though often mitigated by payouts. No widespread backlash.
Wrapping up: Takeaways and what is next
These deals confirm quasi-acquisitions' staying power, with twists like hybrids reshaping the playbook. But regulators are watching closely. The FTC's January 17, 2025, compendium includes a "Joint Statement on Competition in Generative AI Foundation Models and AI Products," warning: "We will continue to scrutinize partnerships and investments that may enable dominant firms to exert undue influence or gain privileged access in ways that could undermine fair competition". They've probed similar deals, like seeking info on "serial acquisitions". We might see one or two more this year before the FTC or SEC adds restrictions—such as expanded HSR scrutiny on "quasi-mergers." For those who want a quick exit, the time is now to join a hot AI startup. But which one?
July 20, 2025 update: Corrected the number of Scale AI employees joining Meta to ~10.