Since the SpaceX/Cursor deal was first announced in April, Cursor has been experiencing what a lot of great restaurants starting out experience: making money and having someone else capture the value. Today, SpaceX announced the deal will go ahead.
According to Forbes, Cursor added $1 billion in additional annualized revenue since the April deal was announced. With SpaceX trading at a 100x+ revenue multiple, that adds $100 billion in market cap to SpaceX. The net new revenue with a 100x multiple eclipses the $60 billion in stock that SpaceX is trading to acquire Cursor. Cursor was basically dilution free and paid for itself before the deal closed, which is a big win for SpaceX shareholders.1
Like any restaurant, you’d rather be a great one than out of business. But success brings in others to the neighborhood and development and then your rent goes up. The hard work you put in can mostly end up in the pockets of someone else based on the rental agreement you sign when starting out.
Cursor has been cooking and the April agreement gave SpaceX a compelling narrative point to boost its IPO prospects. Cursor was bringing revenue to an AI line of business that needed it to match the built-out capacity. The acquisition significantly broadened the narrative around being much more than space + twitter + data center. 2 It helped fill in the gap from less-than-stellar Grok adoption to presenting a potential interplanetary full-stack artificial intelligence play.
3In another way, Cursor has some restaurant lineage. Starting with very obvious ingredients (other people’s models) they then built out atmosphere and experience while serving the same chicken and pasta as others in town. Eventually, they started growing their own ingredients and leveraging their customer preference data. For them, the SpaceX tie-up allows for more of the farm-to-table concept to shine through. 4 Proprietary models built or tuned for the tasks that are most germane to their software engineer customer.
That Cursor faced all sorts of pressure in that journey probably made them much more likely to take an equity deal from a very successful SpaceX. 5 That is even if it drove down the price on itself during the process.