a16z Bets Big on Cursor to Take Down Microsoft-owned VS Code

Andreessen Horowitz (a16z) has shared its strategy behind investing in Cursor, a company that's taking on Microsoft-owned Visual Studio Code (VS Code). The venture capital firm's General Partners, Martin Casado, Sarah Wang, and Matt Bornstein, discussed their investment in an August 2026 podcast.

Cursor's founders argued from the earliest days that the interface between humans and models mattered more than a coding-specific foundation model. They decided to fork VS Code outright, rather than creating a plugin, which they believed would make them part of someone else's product.

a16z led Cursor's Series A in May/June 2024 and its Series B by October the same year. Despite Microsoft owning VS Code, with over 100 million developers and enterprise distribution, a16z saw an opportunity to back the leading independent player in the market.

The firm's strategy was to focus on building a good product that would generate its own go-to-market motion. This approach allowed Cursor to take on the impossible incumbent, Microsoft, and ultimately lead to vertical liftoff. The company moved from an Integrated Development Environment (IDE) to an agent platform to a model platform in roughly two years, using its user base as leverage to build its own models.

Cursor's sales build was one of the fastest in history, with the team reaching over 50% of the Fortune 500 faster than expected. The company applied a research-driven hiring playbook to found account executives and spent around 40% of their time recruiting. The firm also made strategic acquisitions, like Graphite, and integrated ex-founders, which helped it grow.