How SpaceX preempted a $2 billion fundraising with a $60 billion buyout offer

Just hours before SpaceX announced its deal, giving it the option to acquire Cursor — a maker of AI-powered encryption software — for $60 billion, Cursor was on track to close a $2 billion funding round later this week, according to a person familiar with the matter. The round would have valued the company at $50 billion. SpaceX said it will either buy the company sometime later this year or pay $10 billion for Cursor to collaborate on developing artificial intelligence.

Cursor appears to have been running a parallel operation, negotiating a potential acquisition by SpaceX while simultaneously closing 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 engage in acquisition discussions while simultaneously raising new capital. While many private companies prefer to remain independent, Cursor’s $2 billion raise fell short of the capital needed to reach cash flow break-even, which would likely force the company to raise significant financing later, the person said.

SpaceX, which recently merged with xAI, aims to enhance its AI capabilities to better compete with leading companies such as Anthropic and OpenAI. The acquisition of Cursor gives Elon Musk’s company a better chance of challenging rivals in AI coding, the current most lucrative application of the technology.

However, SpaceX is delaying a potential acquisition of Cursor until after its IPO this summer. This is largely because the company wants to avoid updating its confidential financial filings before the listing, and it would be easier to finance the $60 billion purchase using its new publicly traded shares.

The deal appears to benefit both sides 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 may 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 would receive a $10 billion capital injection paid out over time from Elon Musk’s company.

Additionally, if SpaceX goes through with the acquisition, the space giant will likely keep the entire Cursor team intact. Unlike Google’s purchase of Windsurf, which was structured as a key people acquisition, SpaceX currently lacks a meaningful AI workforce and is widely viewed as not having a significant AI business.

Meanwhile, SpaceX has access to massive computing capacity at its data centers in Mississippi and Tennessee, which it can offer to Cursor, perhaps instead of part of the $10 billion “collaboration” payment the programming startup promised.

The company also wants public investors to value it as more than just a space and satellite company. By promising to potentially acquire Cursor, SpaceX is positioning itself as an AI company, giving it a shot at the much higher valuation multiples that Wall Street currently assigns to AI companies.