> Looking for a moat in the technology is always a bit of a trap - it’s in the traction, the brand awareness, the user data etc.

Traction, brand awareness, and user data do not favor Windsurf over GitHub Copilot. The few of us who follow all the new developments are aware that Windsurf has been roughly leading the pack in terms of capabilities, but do not underestimate the power of being bundled into both VS Code and GitHub by default. Everyone else is an upstart by comparison and needs some form of edge to make up for it, and without a moat it will be very hard for them to maintain their edge long enough to beat GitHub's dominance.

But copilot is bundled and is free, and it's still losing to cursor

Define losing? My company pays for Copilot but not for Cursor, and it's not at all clear to me that we're the exception rather than the norm. What numbers and data are you working with?

Copilot has every incumbent advantage, so if Cursor is doing halfway decent in the market (which it is), it's winning by default

That's not actually how unseating an incumbent works. The incumbent can adapt to the threat for quite a while if they act on it, they just have to not be Blockbuster. Copilot is showing every sign of making up ground feature-wise, which is bad news for the runners up.

Incumbent advantage of being in VS Code already? Thing is, Cursor is basically just VS Code, there's hardly any barrier to switching, so it's quite a weak advantage.

the incumbent advantage is the default distribution.

defaults matter

In brand velocity maybe, but copilot is rapidly reaching feature parity with cursor and will invariably overtake it—while costing less to users.

Same with Google vs OpenAI. I tend to agree with the sentiment that I most frequently hear which is that OpenAI is the currently popular brand, but that can only carry them so far against what will eventually be a better offering for cheaper.

Definitely take that point. But this valuation is perhaps more about how much that traction, brand and data is worth to OpenAI, who cannot buy Copilot. $3bn doesn’t seem so disproportionate in that context especially given the amount of money being attracted to the space.