The entire team behind Cove, a Sequoia-backed startup working on an AI-powered collaboration board, has joined Microsoft, with the company announcing it will shut down after April 1. The company has refunded all subscriptions for March and is offering customers a data export process before full deletion of user data.
This is not a traditional acquisition. The deal, structured as a talent acquisition rather than a formal purchase, adds yet another data point to an emerging pattern: Big Tech is increasingly absorbing AI startups not by buying companies outright, but by recruiting their people sometimes nearly all of them while leaving the corporate shell behind.
Cove was founded in late 2023 by Stephen Chau, Andy Szybalski, and Mike Chu, all of whom worked on Google Maps features like Street View. The startup raised $6 million in a seed round from Sequoia Capital, Elad Gil, Homebrew, Adverb, Scott Belsky, and Lenny Rachitsky in 2024.
The product itself addressed a real problem: the founders felt that the chat interface for AI was not editable, and a canvas provided more flexibility when going in different directions with prompts. Cove's tool was an infinite whiteboard where AI could generate different blocks for tasks like trip planning, and it allowed users to access a built-in browser, PDFs, and images to give more context to its AI, which could create new cards, tables, and lists.
Yet Cove faced an impossible competitive reality. Microsoft is aiming to boost adoption of its Copilot assistant, which remains a relatively small fraction of its commercial user base amid big investments in AI infrastructure. The startup competed with the likes of Miro, TLDraw, and Kosmik. More importantly, it competed directly with Microsoft itself. Microsoft added Copilot to its own collaboration product, Whiteboard, in 2023.
The venture capital community is paying close attention to this trend. Whilst Sequoia has enough winners in its portfolio to absorb a loss on Cove without meaningful pain, the broader venture community is watching these deals carefully, recalibrating how they think about risk in AI application companies, and increasingly steering capital toward infrastructure plays and foundational model companies where the defensibility is stronger.
For Cove's team, the landing is soft. The Cove team lands in a strong position; Microsoft's AI division is arguably the most well-resourced AI organisation in the world, with access to OpenAI's models, Azure's computing infrastructure, and a customer base that spans nearly every major enterprise on the planet. But for investors who backed the startup, it represents a reminder: in the age of AI consolidation, distributing compelling ideas matters less than having the distribution engine of a tech giant behind you.