Google Pursues $1.5 Billion Deal with 35-Person AI Coding Startup Mechanize to Boost Model Performance

Google may spend $1.5bn on a 35-person startup to catch up on AI coding

Google is in talks to pay more than $1.5 billion for the people and technology behind Mechanize, a 35-person startup that trains AI to code. The deal surfaced the same week Google's own AI leadership was upended. Google wants its AI to code better. It may have found a shortcut, and it runs through a startup of about 35 people. The company is in talks with Mechanize, a San Francisco startup that trains AI agents to write software, Business Insider reported. The deal would be worth more than $1.5 billion, four people familiar with the talks said. It is still in progress, and the terms could change. What Google would get is narrower than an acquisition. It would hire some of Mechanize's staff and take a non-exclusive licence to its technology. The recruits would work on evaluating and developing Google's models. Both companies declined to comment. Why $1.5bn for 35 people Mechanize is barely a year old. Three former researchers from Epoch AI, an institute that measures how capable models are, launched it in April 2025. Its chief executive, Tamay Besiroglu, co-founded Epoch. Earlier this year the startup said it had raised $9.1 million at a $500 million valuation, with backers including former GitHub chief Nat Friedman, Stripe's Patrick Collison, and the podcaster Dwarkesh Patel. Its stated mission is blunt: automate every job. It started with software because code can be graded. That grading is the actual product. Coding agents learn inside training environments. Each one is a prompt, a working codebase, and a grader that decides whether the agent did the job. Those environments feed reinforcement learning and model evaluations. RuntimeWire reports that one engineer builds each task from idea to grading. That takes about a week. Most of the effort goes into making the grader fair, consistent, and hard for a model to cheat. That is what Google is paying for. Not a consumer product, but the judgement to find where frontier coding models fail and build fair tests around it. A licence buys the finished work. Hiring the people keeps it coming as the models improve. The playbook, again Google has run this move before. Rather than buy a startup outright, it hires the key staff and licenses the technology. The structure sidesteps the antitrust scrutiny a full takeover attracts. In July 2025 it took the Windsurf founders and a non-exclusive licence to their coding tool, a package reported at about $2.4 billion. Varun Mohan, Windsurf's chief executive, now runs Google's Antigravity coding platform. In 2024 Google rehired the Character AI co-founder Noam Shazeer and paid for rights to that startup's technology. Shazeer has since left for OpenAI. The Mechanize talks push the same playbook further down the supply chain. Windsurf gave Google a product developers use. Mechanize would give it the machinery to train the models underneath. The timing is brutal The deal surfaced in a bad week for Google's AI. Days earlier, DeepMind boss Demis Hassabis stepped back and the chief scientist, Jeff Dean, left to start his own company. Google shares fell around 4% on that news. The lab had already been under visible strain over talent and delays. The coding gap is the backdrop. Google's flagship Gemini has slipped repeatedly on coding, while OpenAI and Anthropic pulled developers onto Codex and Claude Code. The fight has moved from the model to the tools around it, and rivals are building their own. Meta just launched its own coding agent. Buying Mechanize's evaluation craft is a way to close the distance without waiting for the next Gemini. What the headline number hides The $1.5 billion figure needs care. RuntimeWire notes it is the value of the whole arrangement, not a purchase price or a fresh valuation. The money could be split across licensing fees, salaries, founders, and investors, leaving a smaller Mechanize still standing. Deedy Das called the talks an acquisition on X, but the underlying report describes a licence-and-hire deal that leaves the company independent. There is a sharper reading doing the rounds. Google wrote the paper that started the large language model era, then lost the lead to OpenAI. Wccftech points to the awkward symmetry. Apple pays Google roughly $1 billion a year to use Gemini. Google may now pay $1.5 billion to a 35-person shop to make Gemini better at a job its rivals have already nailed. For now it is talks, not a deal, and the number could move. But the direction is clear. The scarce thing in AI coding is no longer the model. It is the people who can build the tests it keeps failing.

Google targets AI startup Mechanize's technology and talent in proposed $1.5B deal

Google LLC is reportedly in discussions with an artificial intelligence coding startup called Mechanize Inc. over a deal that would see it license some of its technology and hire a number of its most talented employees. Business Insider was the first to report the discussions, citing information from four people familiar with the conversations. Mechanize was founded last year, saying that its overriding goal is to eventually create AI systems that can automate the work done by every single knowledge worker in the world. It's currently focused on developing simulated virtual environments, evaluation benchmarks and specialized grading systems that can be used to test and train AI agents on various kinds of business tasks. Earlier this year, the startup announced it had raised $9.1 million in funding from investors including former GitHub Chief Executive Nat Friedman, Stripe CEO Patrick Collison and the podcaster Dwarkesh Patel. Its CEO Tame Bisoglu is notable for having previously co-founded the AI research outfit Epoch Artificial Intelligence Inc. Business Insider said Google is currently discussing a sum of around $1.5 billion to strike a non-exclusive licensing agreement for Mechanize's technology. As part of that deal, it would also hire some of Mechanize's experts in model evaluation and development, the sources said. It's believed that Google is interested in using Mechanize's technology to enhance the performance of its AI models, particularly when it comes to coding. That's because Google's coding agents are generally considered to be inferior to those of Anthropic PBC and OpenAI Group PBC, which have seen strong enterprise adoption with Claude Code and Codex, respectively. However, Mechanize's ambitions extend beyond coding. "Our current focus is software engineering, but our long-term goal is the full automation of valuable work across the economy," it says on its rather threadbare website. The discussions between Google and Mechanize highlight two key trends in the AI industry today. The first is that coding has emerged as one of the most lucrative applications of AI models, while the second is that big technology firms are willing to pay serious sums of money to secure the most promising AI developer talent. Google has done this kind of thing before. Rather than buying AI startups outright, it structures the deals as hybrid transactions that enable it to secure their technology through licenses and poach some of their top talents. It's a useful strategy as it gets around the antitrust scrutiny that comes with full acquisitions. One of the most notable examples was Google's acquihire of Windsurf's most experienced AI engineers, and it also licensed the company's tech. Former Windsurf CEO Varun Mohan now leads the development of Google's agentic coding platform Antigravity. Two years ago, Google struck a similar deal with Character Technologies Inc. to re-hire its co-founder Noam Shazeer and obtain non-exclusive rights to its technology. Shazeer recently left Google again, however, joining OpenAI.

Google Eyes $1.5 Billion Mechanize Deal to Enhance AI Coding | PYMNTS.com

The potential deal is worth over $1.5 billion, though the talks are ongoing and the details could change, according to the report. Google is pursuing the deal to boost the coding abilities of its AI models, per the report. Neither Google nor Mechanize immediately replied to PYMNTS' request for comment. Mechanize builds environments and evaluations for frontier coding agents, enables models to carry out software engineering work in the environments, and scores the model's performance to support reinforcement learning and evaluations, according to its website. Mechanize announced its launch in an April 2025 press release and described the company as "a startup focused on developing virtual work environments, benchmarks and training data that will enable the full automation of the economy." In April, Mechanize said in a press release that it raised $9.1 million at a $500 million post-money valuation. Mechanize said at the time in a post on X that it aims for full automation of the economy. "We will achieve this by creating simulated environments and evaluations that capture the full scope of what people do at their jobs," the company said in the post. "This includes using a computer, completing long-horizon tasks that lack clear criteria for success, coordinating with others, and reprioritizing in the face of obstacles and interruptions." It was reported in July 2025 that Google successfully recruited several top executives and researchers from AI code generation startup Windsurf. Unlike a traditional acquisition, Google's agreement with Windsurf involved paying $2.4 billion in licensing fees to utilize certain Windsurf technologies under a non-exclusive arrangement. AI coding assistants enable smaller teams to do tasks that would cost a lot more and require additional engineers, and they cut development time for businesses to bring products to market faster, PYMNTS reported in June 2025. It was reported in May that OpenAI's coding agent, Codex, and enterprise AI are becoming more important growth engines for OpenAI.