Ask HN: How is Cognition able to raise at $10B? | Hacker News Reader

Ask HN: How is Cognition able to raise at $10B?

4 pointsthereitgoes45610 comments

I'm looking for real answers and to understand the thought process particularly of investors. Please try not to answer with "VCs are idiots", unless you absolutely must.

Cognition AI, the makers of "Devin" and recent acquirers of Windsurf, raised recently at a $10B valuation [1]. This is about the same valuation as Cursor, which is the fastest growing AI consumer app in the world, with $500MM ARR, beloved by many programmers.

Meanwhile Devin launched with an immediate scandal and continues to have poor reputation. It is not used by anyone I know, seems to be targeted at enterprise, and has announced a single-digit number of deals with companies. Something makes me think they probably do not have $500MM ARR or anywhere close. They have no background in ML, hiring only contest programmers. So how are they raising at much higher valuations than any other company in this space with much less of a track record? Is it possible they are a great behemoth behind the scenes?

For investors, how do they expect to make their money back? Could Google or some other company buy Cognition at $10B, or $20B, or even $5B? Are there strong clauses that protect investors in these situations? How can they possibly not lose a bunch of money here?

[1] https://www.wsj.com/articles/cognition-cinches-about-500-million-to-advance-ai-code-generation-business-f65f71a9

Unless you know all the terms the valuation is pretty meaningless. For example if I invest $500 for 1 share of your startup with an extra clause saying that I get the first $500 if you ever sell the company at any price then you could claim I valued you at $500 a share but since I make a profit if you sell the entire company for over $500 you could also I valued you at $0

The same kind of environment that made VCs pour billions into Bored Apes just a few years ago enables this: sunk cost + FOMO

Early investors incentivized to pump and dump their bags, new investors still believing the dream of AI agents being worth trillions of dollars. They’re likely getting pretty terrible terms on these deals too (in particular crazy liquidation preferences), if any previous bubble serves as reference.

It's reasonable to believe that the enterprise/B2B market will eventually be larger than Cursor. It is weird to put in that much funding before demonstrated traction though.

But that just raises more questions; why would Cognition be better positioned for B2B? Wouldn't Cursor have an advantage as they already have a foothold in the B2C market? Expanding from there seems a lot easier than coming for B2B directly: Cursor already has mindshare among developers.

The B2B dominance of Microsoft Office can, after all, not exist without B2C Microsoft Office.

> why would Cognition be better positioned for B2B?

They bought windsurf and they had b2b customers already?

That being said, they're also the "devin" people, so I'd probably avoid them, like I avoid anything langchain related.

What’s the best “agentic framework” options these days, besides langchain? (Other than “build your own” - In particular something that gives me observability/evals out of the box)

They acquired windsurf customers, that would be my immediate thought of real value they gained. I haven’t used Devin, so I can’t talk to much on their platform. Windsurf was great for new people that wanted more vs using online builders. Some people could draw a direct comparison as windsurf and cursor being neck and neck on comparison a few months ago, not so much today.

You might know this already but we are in the middle of an AI bubble.

The valuations are meaningless and that is the massive ponzi scheme that is hoping that another company acquires it for more than the valuation or even better - the founders sell shares onto the secondary market before the company collapses.

Hopin was once 'valued' at $4B - $9B. Clubhouse was once 'valued' at $4B with little to no revenue to back up their valuations or even accounting for the risk of direct competitors.

Given that Anthropic is the supplier AND competitor (with Claude Code) to both Cursor and Devin you will find that unless both of them find a way to enter a new market which doesn't already benefit Anthropic, they are going to find it extremely difficult to justify their valuations.

The CEO went to harvard and did well in some math competitions. Believe it or not, alot of fundraising isnt much deeper than this

VCs are idiots

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