Microsoft hires the team of Sequioa-backed AI collaboration platform, Cove

Microsoft has made another strategic move to strengthen its AI capabilities — this time by acquiring the entire team from Cove, a startup backed by the prestigious Sequoia Capital fund. For the industry, this signals that the Redmond giant is not only building its own artificial intelligence tools, but is actively acquiring talent and technologies from competitors. Cove had the ambition to change how teams work on projects together — using AI to automate and optimize collaboration. Now this vision will be developed within Microsoft, and the Cove service is being shut down with an effective date of April 1, 2025.

The story of Cove is a classic example of a situation that is increasingly common in the AI ecosystem: a promising startup with good funding, a solid team, and a concrete product falls into the orbit of a larger player and gets absorbed. For users, this means the end of the service and data deletion. For the industry — another signal that consolidation of the AI market is accelerating.

How Cove was created and why it caught Sequoia's attention

Cove was founded in late 2023 by a team consisting of Stephen Chau, Andy Szybalski, and Mike Chu — engineers with a background at Google, where they worked on Google Maps features, including the famous Street View function. This was not a group of beginners — these were people with experience building products for billions of users, who understood how to scale technology and design interfaces for mass audiences.

In 2024, Cove raised 6 million dollars in a seed round from an impressive group of investors. In addition to Sequoia Capital, the group included Elad Gil (a well-known venture capitalist and former Google and Twitter employee), Homebrew, Adverb, and business angels such as Scott Belsky (known from Adobe and Behance) and Lenny Rachitsky (a popular advisor in the tech industry). This was not a standard seed round — the list of investors suggests that Cove had access to network connections at the highest level of the industry.

Cove's concept focused on an AI-powered collaboration board — a tool for team collaboration that would use artificial intelligence to automate repetitive tasks, organize information, and facilitate communication. In an era where every company is looking for ways to integrate AI into its processes, such a platform had potential. Cove positioned itself as a solution for creative and technical teams that want to work more efficiently thanks to AI.

Microsoft absorbs talent instead of competing on equal terms

Microsoft's acquisition of the Cove team is an example of a strategy that the Redmond giant has consistently applied in the AI era: instead of waiting for a startup to build a dominant product, Microsoft simply buys talent and integrates it with its existing teams. This approach is cheaper than competing for years and more effective than investing in internal development from scratch.

Microsoft has a long history of such acquisitions. Suffice it to mention the acquisition of Nuance Communications for 20 billion dollars, which strengthened Microsoft's capabilities in natural language processing. Or the acquisition of Activision Blizzard for 69 billion dollars, which was more about content and market share than technology. In the case of Cove, we are dealing with a textbook talent-acquisition — a team of engineers with experience building AI products goes directly to Microsoft, where they will work on developing collaboration tools.

Interestingly, Microsoft didn't have to pay billions. The transaction amount was not disclosed, but assuming that Cove had only 6 million dollars in capital and dozens of people in the team, the whole thing likely cost significantly less than the mega-acquisitions of the past. This suggests that for the startup, acquisition by Microsoft was a pragmatic way out — instead of fighting for survival in a competitive market, the team got a chance to work on similar problems within the largest software player in the market.

The end of Cove: what will happen to data and users

According to a message sent to users, the Cove service will be shut down on April 1, 2025. This means that users have approximately three months to transfer their projects, documents, and data to other tools. Cove will likely provide data export or a transition period, but the details of this process have not been fully disclosed.

The deletion of user data after service shutdown is standard practice in the industry, but always painful for those who invested time in building their projects on a given platform. For teams that actively used Cove, the shutdown means the need to migrate to alternatives — most likely to solutions offered by Microsoft, such as Microsoft Teams, SharePoint, or planned AI integrations in the Office suite.

This is a key point in Microsoft's strategy — by acquiring Cove, Microsoft not only eliminated a competitor, but at the same time forced users to migrate to its ecosystems. Users who were interested in Cove as a collaboration tool will naturally look for similar functionality in Microsoft 365 or other Microsoft products. This is a classic market consolidation tactic.

Why Microsoft needs better AI-powered collaboration tools

Microsoft already has Teams — a communication platform used by hundreds of millions of people. It has SharePoint for document management. It has Copilot integrated into Office. But what Microsoft doesn't fully have is an elegant, intuitive tool for collaborating on projects that would be powered by AI from the ground up. Cove had this concept — a collaboration board with AI that understands project context and automatically organizes information.

Microsoft is aware that competition in this area comes from many sides. Figma dominates in collaborative design. Notion built an empire on flexible workspaces. Miro controls the brainstorming board market. Each of these tools is now integrating AI, but none of them has Microsoft's resources. Acquiring the Cove team allows Microsoft to accelerate the development of its own solutions in this segment.

Another reason is the fact that Teams is still perceived by many users as a corporate tool, sometimes too heavy and complicated. Cove had a chance to be lighter, more intuitive, more AI-native. The team behind Cove — with experience from Google — understands how to build products that are simple for the user but advanced under the hood. Microsoft wants this experience in-house.

The trend of talent-acquisition acquisitions in the AI era

Cove's acquisition by Microsoft is part of a larger trend we've been observing in the AI industry over the past two years. Large corporations — Microsoft, Google, Meta, Amazon — are no longer waiting for a startup to build a dominant product and then having to pay billions of dollars. Instead, they buy teams at early stages, integrate them with their infrastructure and resources, and develop products internally.

Google has done this systematically for years. Meta acquired Ctrl Labs for 1 billion dollars, primarily for a team working on neuromorphic interfaces. Microsoft acquired Activision Blizzard, but also smaller studios and teams. Amazon buys startups in AI and cloud computing. These are no longer acquisitions in the traditional sense — rather, talent acquisition with a corporate label.

For startups, such a situation has a dual effect. On one hand, the team gains access to unlimited resources, infrastructure, and network of a giant. On the other hand, the startup loses independence, and its product is either integrated with existing solutions or shut down. For venture capital investors, this means that an exit in the form of acquisition by a large corporation becomes increasingly realistic — and profitable — than an IPO or independent growth.

Implications for the Polish AI market and startups

In Poland, we are observing similar trends, albeit on a smaller scale. Polish AI startups, such as Huuuge Games or Synerise, are attracting the attention of international investors. However, we lack large Polish players who could do what Microsoft does — acquire talent and integrate it with their products. This means that Polish AI teams have two main exits: either they are acquired by a foreign corporation (as in the case of Cove), or they try to build independently, which is much more difficult.

The story of Cove should be a lesson for Polish founders: if you're building an AI product that attracts the attention of major investors and has a solid team, you need to be prepared for the possibility that large corporations may want to acquire you. It's not always bad — sometimes it's the only realistic way to scale. But it's worth being aware that your product could be shut down if a large corporation decides that the team is more valuable than the product itself.

What Microsoft will learn from the Cove team

The Cove team — engineers from Google who worked on Street View and other Maps features — brings specific experience to Microsoft. First, they know how to build interfaces for billions of users. Second, they understand how to integrate AI into products in a way that is natural and intuitive. Third, they have experience building collaboration tools at scale.

Microsoft will likely use this knowledge to develop better collaboration capabilities in Teams, SharePoint, and Office. We can expect that within the next 6-12 months, new features will appear in these products that will look very similar to what Cove was trying to build. Microsoft also has the resources to deploy this for billions of users — something that Cove as an independent startup never had a chance to achieve.

This is ultimately the point of the acquisition: you don't buy a product, you buy knowledge, experience, and the ability to innovate. Cove as a product may be shut down, but its DNA will live on in Microsoft's products for years to come.

Microsoft's acquisition of the Cove team is further proof that in the AI era, market consolidation is accelerating. Startups that build promising products are being acquired by large corporations faster than ever before. For the industry, this means that innovation will be increasingly concentrated among a few players — Microsoft, Google, Meta, Amazon. For users, this may mean better products, but also less competition and fewer independent alternatives. The story of Cove is not an end, but rather the beginning of a new chapter — its team will now work on products that will be used by billions of people.