Cursor snaps up enterprise startup Koala in challenge to GitHub Copilot

The startup behind the viral AI coding app Cursor is snapping up prime expertise from AI enterprise startups in a bid to bolster its competitors with Microsoft’s GitHub Copilot and win over companies seeking to supercharge their staff with AI coding instruments.

In a single current case, Cursor maker Anysphere struck a deal to amass the AI-powered buyer relationship administration (CRM) startup Koala, two sources conversant in the matter instructed TechCrunch.

As a part of the deal, Cursor will deliver on a number of of Koala’s prime engineers to construct out a devoted enterprise-readiness group. Nonetheless, the complete Koala group won’t be becoming a member of Anysphere, and Cursor doesn’t plan to combine the startup’s core CRM product, a supply instructed TechCrunch.

Koala plans to close down in September, the corporate mentioned in a blog post revealed on Friday. The announcement comes simply 5 months after Koala raised a $15 million Series A led by CRV, with participation from HubSpot Ventures, Recall Capital and Afore. Koala was almost 4 years previous, had roughly 30 employees in line with LinkedIn, and had labored with shoppers resembling Vercel, Statsig, and Retool.

Sources on this story requested anonymity to talk with TechCrunch about non-public issues. Koala and its founders didn’t reply to TechCrunch’s request for remark. Cursor declined to remark.

The Koala deal paints an image of the 2 kinds of AI startups we’re seeing in 2025. There’s Cursor, a juggernaut of an AI device that’s rising so quick it’s starting to encroach on the AI space’s largest players, together with Microsoft and Anthropic. On the similar time, there’s a rising variety of startups like Koala: B2B AI startups that appeared promising — with a co-founder from Meta and advisors like Jack Altman — however have shortly run out of steam.

Cursor is capitalizing on this disparity, leveraging middling AI startups as a way to construct out its personal enterprise choices. Anysphere additionally not too long ago hired the CEO of cybersecurity startup Resourcely, Travis McPeak, to steer the corporate’s safety groups, in line with The Data.

These offers look quite a bit like Massive Tech’s reverse-acquihires, resembling Meta’s recent deal to hire Scale AI’s leaders. Very similar to in Meta and Scale’s deal, Cursor can now transfer shortly to construct out new enterprise segments whereas leaving questionable companies behind.

Cursor hopes that Koala and Resourcely’s expertise will assist it evolve from a private developer device that engineers quietly use at work and turn into an enterprise‑broad platform that corporations pay massive contracts to entry. Most enterprises as we speak that provide staff an AI device select Microsoft’s GitHub Copilot, which works as an AI-powered extension to current built-in growth environments (IDEs) resembling VS Code or JetBrains.

Cursor, which is a standalone AI-powered IDE, must beat out GitHub Copilot to strike offers in lots of circumstances, and it typically does in head-to-head exams. Nonetheless, Microsoft has the higher hand within the enterprise due to its long-standing relationships with legacy corporations, in addition to its massive gross sales, safety, and help groups.

Within the final 12 months, Cursor has decisively constructed out its go-to-market and gross sales group — which now accommodates dozens of staff. A number of Cursor staff now spend their days visiting the places of work of Fortune 500 corporations and displaying them how they will combine Cursor’s AI instruments into their enterprise, in line with an individual conversant in the matter.

Cursor’s enterprise push appears to be gaining traction. Anysphere mentioned it reached $500 million in ARR in June, and now works with greater than half of the Fortune 500, together with NVIDIA, Uber, and Adobe. A supply conversant in the matter says that income has since grown, and an more and more massive share of that progress comes from enterprise offers.

However as Cursor competes with Microsoft, it additionally must fend off a rising subject of threats.

Essentially the most urgent one is Anthropic, an important companion to Anysphere whose Claude Code product has grown rapidly in recent months. Cursor depends closely on Anthropic’s AI fashions to energy its personal coding merchandise. (As one in every of its greatest prospects, Cursor can also be important to Anthropic.)

On the similar time, Google simply scooped up the leadership team of Windsurf, a serious competitor to Cursor within the AI-powered IDE area. Cognition, the maker of the AI coding agent Devin, acquired the rest of Windsurf’s team, doubtlessly providing a big raise to each companies.

It’s price noting that every one of those are various kinds of AI instruments, however employers are likely to view the merchandise equally: as AI instruments that may enhance the productiveness of software program engineers. These employers may need the suitable concept. In spite of everything, Anthropic, Microsoft, Cursor, and Cognition are all developing AI coding agents which aim to automate workflows completely, which can be the place the AI coding area converges.

You would possibly ask, why is everybody competing with everybody else to construct AI coding merchandise? Coding instruments have turn into one of many first AI merchandise to search out “product market match” — the elusive objective that makes the ears of enterprise capitalists perk up. AI coding merchandise are getting used day by day by thousands and thousands of software program engineers, and so they have began to generate actual income.

Put one other means, the race isn’t nearly constructing one of the best AI coding device anymore. It’s about who can scale their enterprise operations the quickest whereas the market remains to be up for grabs. With the likes of Microsoft, Google, and Anthropic all transferring quick, Cursor’s acquisition technique could decide whether or not it joins their ranks or turns into one other startup that couldn’t scale quick sufficient.