SpaceX bought Cursor for $60 billion last week, the largest-ever acquisition of a VC-backed startup. Here’s the story of the multi-year team effort that led Neo and me to make the first investment in Cursor, including wisdom from a 23yo colleague who saved me from a bad judgment.
First, congratulations to the people who earned all the credit for this incredible accomplishment. Michael Truell and co built a leading-edge product, unparalleled team, and amazing company. It’s no surprise they achieved this historic feat.
While most startup investors reflect on how they decided to invest in a company, Neo is different. We’re “people capitalists,” not just venture capitalists: we chose the people three years before they became founders. Cursor exemplifies how we invest in people and add value as a mentorship community.
We first met Michael in June 2019 when he was an MIT freshman. The whole story begins two years earlier, when the sage Albert Ni and I crisscrossed America’s top colleges to pick the first cohort of Neo Scholars.
Obsessed with finding the most promising CS students, we spent thousands of hours interviewing candidates. Albert taught me untold lessons about assessing young talent. Thanks to him we met the brilliant Brian Gu in 2017 and chose him as one of the first Neo Scholars.
Brian has an amazing eye for talent, and I relished visiting his Hack Lodge hacker house multiple times a year to spend hours with the participants. In early 2019, he introduced us to Michael Truell and Ben Spector, each of them exceptional. I interviewed them that summer, and they both eventually became Neo Scholars.
I remember my first meeting with the 18yo Michael Truell at a cafe in Mountain View. As I did with every student in those years, I gave him a paper-and-pen coding challenge. He breezed through it, producing a clean, elegant solution in a few lines of code. I asked him to give me a coding challenge back, and he almost stumped me with a much tougher task.
Then we spoke about each other’s backgrounds, and I noted that Michael had already done multiple entrepreneurial efforts starting in high school. He was set on starting his own startup one day. Michael’s unique combination of calm confidence, kind energy, and absolute genius were unforgettable. I marked my notebook with stars and “A+” marks to highlight that he was a superstar. I knew within minutes that I’d want to invest in anything he does.
We welcomed Michael, his future cofounder Aman Sanger, and Ben into the Neo community and offered them mentorship and connections that would maximize their potential.
During the next three years before Cursor, my colleagues and I poured our hearts into supporting these rising stars.
We hosted Michael at Startup Camp, our week-long bootcamp for would-be founders at a beautiful workspace on the California coast. Little did we know how many of the students who met him there would go on to become future Cursor engineering leaders: Luke Melas-Kyriazi, Andrew Milich, Merrill Lutsky, Greg Foster, Tomas Reimers, and Wanqi Zhu.
Three of my colleagues recall different sides of Michael. Claire Shorall remembers the coachability. Michael was pitching a new product and wanted her feedback on his customer calls. Huddled around the phone, Claire gave him points on crafting a narrative, and what struck her was his curiosity, his humility, and how fast he improved. He clearly had the magnetic “it” factor of a future star.
Lauren Lee remembers the mischievous confidence. At one Neo group competition, Michael named his team: “Winning Team.” Jan Crisostomo remembers the depth. She spoke to him about how his parents, both journalists, shaped his worldview. He listened more than he spoke and exuded a maturity and wisdom beyond his years.
Through the COVID years I took countless calls and Zoom sessions with Michael, Aman, and Ben. I introduced Michael to his summer internship at Octant with Ramsey Homsany, and Aman to his summer internship at You.com with Richard Socher.
As they entered their senior year, when the three said they wanted to start an AI company, I was ecstatic. I instantly committed to biweekly mentorship sessions to give them feedback on their ideas. The trio was brilliant, and I remember feeling I had little to offer them except constantly encouraging them to aim higher and think bigger.
Their last semester at MIT was a dark moment for startups. Inflation and rising interest rates had caused a giant pullback in VC funding in the spring of 2022. Ben decided to quit Cursor and do a PhD instead, and I spent hours trying in vain to convince him otherwise.
That June, a week before we offered to invest in Cursor, I tweeted that: ”Unlike VCs predicting doom, I’m bullish for early-stage startups,” with an in-depth rationale.
Yet when it came to setting the price for Cursor’s first financing, I almost missed the opportunity by being stingy.
Michael and Aman pitched us to lead Cursor’s first financing round. We were eager to invest, and told them our only concern was the number they were seeking felt high compared to market at the time.
Sensing that they didn’t have better offers, I planned to propose about 30% lower. My 23yo colleague Stephen Cornwell, who was on the call with us, advised me:
The young Michael and Aman were deft negotiators: they didn’t show the slightest hint of doubt about their position.
Thankfully, I listened to Stephen’s advice and improved our offer. We ultimately settled on a valuation 10% lower than what they’d originally proposed. I’m pretty sure this was the last time any investor haggled with Cursor.
The lesson I’ve learned since then is to focus more on the people than on the numbers, and never drive too hard a bargain when investing in superstars. It’s because of experiences like this that our funding terms for Neo Residency are so generous. When dealing with truly exceptional people, it’s ok to offer ridiculously favorable terms.
As Cursor grew, we invested more capital in the company at every chance we got. They merged with Anysphere and joined forces with their college friends Arvid and Sualeh, and later raised additional money from amazing VCs including A16z, Accel, Benchmark, Coatue, OpenAI Fund, Thrive, and others.
The fast-growing startup went on to hire multiple Neo Scholars, starting with Luke, who had met Truell at Neo Startup Camp. We introduced them to countless customers, from individual developers to large enterprises. Mainly, we watched from the sidelines in astonishment as they assembled an unparalleled team and grew faster than any company in history.
Last week’s headline was a $60 billion acquisition. But that was never the story we were watching. For seven years, we saw a team come together, a founder grow, and a community show up for each other. That's the story. Congratulations to Michael, Sualeh, Arvid, Aman, and everyone who's been part of the journey.
I loved reading this — so many good memories! Congrats to Michael, who always had It™️, and the rest of the Cursor team. 🫶
My number you change