How SpaceX pre-empted $2 billion in funding with a $60 billion acquisition offer

Hours before SpaceX announced a deal giving it an option to acquire Cursor, a maker of AI-powered coding software, for $60 billion, Cursor was expected to close a $2 billion funding round later this week, according to people familiar with the matter. This round would have valued the company at $50 billion. SpaceX said it would either buy the company sometime later this year or pay Cursor $10 billion to help develop AI.

Cursor is apparently running a parallel process, negotiating a potential acquisition by SpaceX while also finalizing a private funding round with investors including Andreessen Horowitz, Thrive, Nvidia and Battery Ventures, details of which were first reported by TechCrunch last week.

It is not uncommon for startups to negotiate acquisitions while raising new capital. Many private companies want to remain independent, but Mr. Cursor’s $2 billion raise falls short of the funding needed to break even on cash flow, and the company will likely be forced to raise more money later, the people said.

SpaceX, which recently merged with xAI, has been looking to enhance its AI capabilities to be more competitive with leaders like Anthropic and OpenAI. Acquiring Cursor gives Elon Musk’s company a chance to take on rivals in today’s most lucrative technology application: AI coding.

However, SpaceX has delayed any potential acquisition of Cursor until after its IPO this summer. This is primarily because the company wants to avoid updating its confidential financial reports before going public, and the new public stock will make it easier to raise funds for the $60 billion acquisition.

This agreement appears to be mutually beneficial for several reasons.

Despite rapid revenue growth, Cursor faces stiff competition from Anthropic’s Claude Code and OpenAI’s Codex. Given this threat, the startup could face challenges in continuing to raise private capital to fund its massive computing needs. Even if SpaceX doesn’t go through with the acquisition, Cursor is receiving a $10 billion capital injection from Elon Musk’s company that will be paid over time.

Additionally, if SpaceX goes through with the acquisition, the space giant will likely keep the entire Cursor team intact. Unlike Google’s acquisition of Windsurf, which was structured as a key acquisition, SpaceX currently lacks qualified AI talent and is widely seen as not doing any significant AI business.

SpaceX, meanwhile, has access to vast amounts of computing power at its data centers in Mississippi and Tennessee, which it could offer to Cursor in return for a portion of the $10 billion “collaboration” payment it promised to the coding startup.

The company also wants retail investors to see it as more than just a space and satellite business. By pledging to potentially acquire Cursor, SpaceX is positioning itself as an AI company, giving it an opportunity to command a higher valuation multiple than Wall Street currently assigns to AI companies.