In a strategic move to strengthen its position against GitHub Copilot, Cursor, the company behind the popular AI coding app, has acquired enterprise startup Koala. This acquisition marks a significant step in Cursor’s efforts to expand its reach in the business sector and enhance its AI-powered coding tools for enterprise use.
The deal, which brings several of Koala’s top engineers to Cursor, will focus on building a dedicated enterprise-readiness team. However, Cursor will not integrate Koala’s core customer relationship management (CRM) product, and the entire Koala team will not be joining the company.
Koala, a nearly four-year-old startup with approximately 30 employees, recently raised $15 million in a Series A funding round. The company has worked with notable clients such as Vercel, Statsig, and Retool. Following the acquisition, Koala plans to shut down its operations in September.
This move reflects the current landscape of AI startups, where companies like Cursor are experiencing rapid growth and challenging established players, while others struggle to gain traction. Cursor is capitalizing on this trend by acquiring talent from promising but struggling AI startups to bolster its enterprise offerings.
Cursor’s enterprise push appears to be gaining momentum. The company recently reported reaching $500 million in annual recurring revenue (ARR) and now works with more than half of the Fortune 500 companies, including Nvidia, Uber, and Adobe. A growing share of this revenue is coming from enterprise deals.
However, Cursor faces increasing competition in the AI coding space. Anthropic, a crucial partner for Cursor, has seen rapid growth with its Claude Code product. Additionally, Google recently acquired the leadership team of Windsurf, a major competitor to Cursor in the AI-powered integrated development environment (IDE) space.
As the race to dominate the AI coding tools market intensifies, Cursor’s acquisition strategy may prove crucial in determining whether it can compete with tech giants like Microsoft, Google, and Anthropic. The company’s ability to scale its enterprise operations quickly could be the key to its success in this rapidly evolving market.
