High Costs and Minute Margins that thre

In February, AI Windsurf Codification was in talks to create a large new round in a $ 2.85 billion valuation led by Kleiner Perkins, with a double valuation that hit six months earlier, according to sources at Techcrunch at that time. This agreement did not happen, according to a source familiar with the issue. Instead, the news broke in April that the start was planning to sell itself to Openai for about the same valuation: $ 3 billion.

While this agreement fell famously, a bigger question remains: if the start increased so quickly and attracts VC’s interest, why would it sell at all?

Trusts tell TechCrunch that for all popularity and advertising campaign around AI encoding assistants, they can really be mass businesses that lose money. Vibe coders in general, and in particular Windsurf, can have such expensive structures whose gross margins are “very negative”, a person near Windsurf in TechCrunch said. Which means it costs more to run the product than the start could charge for it.

This is due to the high cost of using large linguistic models (LLMS), the person explained. AI encoding assistants are particularly pressured to always offer the latest, more advanced and more expensive LLMS, because model manufacturers are particularly adjusting their latest models for encoding improvements and related tasks such as debugging.

This is a challenge that is exacerbated by intense competition in the market-coding and assisted market. Opponents include companies that already have huge customer bases such as Anysphere’s runner and GitHub Copilot.

The simplest path to improving the margins in this business includes the newly established businesses that create their own models, thereby eliminating the cost of payment of suppliers such as Anthropic and Openai.

“It’s a very expensive business to run if you are not going to be in the model game,” the man said.

But this idea comes with its own dangers. Windsurf’s co-founder and chief executive, Varun Mohan, finally decided not to create her own model-a costly business, the person said.

In addition, model manufacturers are already competing immediately. Anthropic offers Claude Code and Oponai offers Codex, for example.

The sale of the business was a strategic move to lock high before it could be undermined by the companies themselves provided by its AIs, including Openai and Anthropic, which also entered the AI encoding market.

Many people believe that the same pressure on the margins facing Windsurf could affect Anysphere, the runner manufacturer, as well as the coders such as loyalists, replits and others.

“The margins in all” Code Gen “products are either neutral or negative. He added that he believes that the variable costs for all newly established businesses in the field is very close to 10% to 15% of the other.

Unlike Windsurf, Anysphere has grown so quickly that she intends to remain an independent company, having already rejected acquisition bids, including reports, from Openai.

And any announced in January That he is trying to build his own model, which could give him more control of his expenses. In July, the start hired two leaders from Anthropic’s Claude Code Group, information reported, but two weeks later, these employees returned to work on the human.

In addition to building a model, Anysphere could expect that the cost of LLMS will be reduced over time.

“This is where all banking,” said Erik Nordlander, Google Ventures General Associate. “The cost of conclusions today, this is the most expensive that will ever be.”

It is not quite clear how true this is. Instead of falling as expected, the cost of some of the latest AI models has increased, as they use more time and computational resources to handle complex multiple stations.

When that changes it remains to see. On Thursday, for example, Openai introduced a new flagship model, GPT-5, with fees that are significantly smaller than its competitor, Claude Opus 4.1 by ANTHROPIC. And any was offered immediately This model as an option for cursor users.

Anysphere has also recently changed its pricing structure to pass along the increased cost of Anthropic’s latest Claude model, especially to its most active users. The traffic caught some of the cursor customers by surprise, as they did not expect additional charges over the $ 20 plan per month. CEO whose CEO Michael Truell apologized for unclear communication on the change of pricing to a blog.

This is the rock and the hard part. Although the runner is one of the most popular AI applications, having reached $ 500 million in ARR in June, the company’s users base may not be as faithful to the product if another company develops a tool that is superior to the runner, investors say.

Anysphere did not respond to a request for comments.

Given the competitive landscape and cost, Windsurf’s decision to come out may prove to be understandable. Following the fall of the Openai Agreement, the founders and key employees left Google in an agreement that led to a $ 2.4 billion payment to key shareholders. Then the rest of the business is sold to knowledge.

While many, including the protruding VC, criticized Mohan for leaving about 200 google -free officials, a source familiar with the deal insisted that the acquisition was truly maximizing the results for all employees.

Apart from the runner, other AI encoding tools are also one of the fastest growing start -ups of Generation LLM, such as Replit, Lovable and Bolt, and all of them are based on model manufacturers.

In addition, if this extremely popular business sector, which already creates hundreds of millions of revenue or more a year, finds it difficult to build over model manufacturers, what can mean for other, more hatched industries?