"We are in a market that's had an iPod moment and it's going to have an iPhone moment."

When four MIT grads decided to build a code editor while everyone else was building AI agents, they created one of the fastest-growing developer tools ever. In a conversation with a16z General Partner Martin Casado, Cursor co-founder and CEO Michael Truell offered a candid look into the company’s meteoric rise from a failed 3D CAD venture to a dominant force in AI-assisted programming. Truell unpacked the immense technical and operational challenges of managing “mayhem” at hyper-scale, detailed the company’s unconventional strategies for hiring and M&A, and shared his vision for the coming “iPhone moment” in software development.

From a Failed Venture to Focused Disruption

Before Cursor became synonymous with AI-powered coding, its founders were exploring a completely different vertical. “Funny story, because Cursor was once a 3D company,” Casado recalled. Truell confirmed this early misstep, explaining that the founding team was initially excited by the potential of AI to automate various forms of knowledge work. Their thesis was to build “a cursor for X for many different spaces,” starting with mechanical engineering and CAD systems.

The idea, however, suffered from a critical flaw. “It was a bad idea. The founder-market fit was horrible,” Truell admitted. The team lacked an intuitive sense of the mechanical engineering workflow, leading to what he described as a “blind man in the elephant problem.” After six months of struggling with poor data availability and a difficult cold-start problem, they pivoted back to their core competency: programming.

A Deliberate Bet on Owning the Editor:

Unlike many competitors who were building agents or spreading their efforts across multiple integrations like the CLI and IntelliJ, Cursor made a deliberate and controversial choice to focus on a single surface: a fork of VS Code. “We were really, really intentional about wanting to own the surface,” Truell stated. Many observers were skeptical, believing developers were too attached to their existing editors to switch. But Truell’s team knew this was false, having personally switched from Vim to VS Code specifically for GitHub Copilot. “We knew that if you built a better mousetrap you could get people to switch,” he said. “The bar would be high.”

This intense focus allowed them to move quickly. Within months of the pivot, they had launched a beta that immediately gained traction, setting off the momentum that would define their explosive growth.

Navigating Hyper-Scale and Infrastructure ‘Mayhem’

Cursor’s rapid adoption created immense technical challenges for its small founding team. “I’ve never seen scale like this this quickly, especially with a small team,” Casado remarked. Truell described a series of escalating infrastructure crises, from running a Kubernetes cluster “larger than many other companies” with just five people to managing complex database demands that pushed services like AWS RDS to their limits. “You think of these public clouds as they have it all together,” Truell said, “but really it’s a very small set of customers for the highest, highest level of scale and they’re figuring it out on the fly.”

The API Token Hunt:

The next major bottleneck came from the LLM providers themselves. Cursor’s traffic grew so large that it became a significant portion of its API providers’ revenue, forcing them to make capacity planning decisions around the startup’s growth. “I don’t think the API providers really knew what to make of us,” Truell said, describing the situation as “these four 20-somethings and their thing now comprises like a really high double-digit percent of their API revenue.”

To maintain stability, the team became adept at diversifying its dependencies. This involved not just building relationships but also getting technically creative. “Turns out these API tokens… you can get them for the same model for many providers,” he explained. The team got very good at “hunting out all the Sonnet tokens that exist in the world” and spreading their load across multiple resellers and cloud providers to ensure resilience.

An Unorthodox Playbook for Talent and M&A

Cursor’s approach to building its team is as deliberate as its product strategy. Truell outlined a unique and rigorous hiring process centered on a two-day, in-office trial for all engineering and design candidates. Instead of a packed schedule of whiteboard interviews, candidates are given a desk, a laptop, and a choice of projects to work on within a frozen version of the codebase.

“It’s a really great test that tests for orthogonal things to the normal coding style interviews,” Truell explained. The trial evaluates a candidate’s ability to navigate the codebase end-to-end, their product sense, and their overall agency. Crucially, it also serves as a two-way diligence process. “It really gives the candidate a ton of information about the company and what it’s going to be like to show up on the first day,” he added, noting this leads to a very high chance of mutual fit.

M&A as a Recruiting Tool:

Truell revealed that the company’s aggressive M&A strategy is primarily an extension of its relentless pursuit of talent. “So far for us, it’s been consistent with an approach of do anything possible to get the most talented people,” he said. The company has engaged in “crazy recruiting stunts” like flying across the world to meet a candidate after they’ve already said no. When those talented individuals happen to be working on their own companies, M&A becomes a natural pathway.

He pointed to the acquisition of Super Maven, a company founded by the creator of GitHub Copilot’s predecessor, as a prime example. The teams were working on complimentary autocomplete models, and after building a relationship over many months, Cursor aggressively pursued the acquisition. Looking forward, Truell sees M&A also becoming a strategic tool to build out a bundled “AI coding suite” and add complementary products to the company’s portfolio.

The Coming ‘iPhone Moment’ for AI Coding

When asked about the existential risk of building a software company that is, in turn, automating the creation of software, Truell remained pragmatic. He argued that despite the hype, the industry is nowhere near full automation. “Building software in a professional setting… it’s just so inefficient,” he stated. “It’s really easy at an executive level to underestimate just how far away we are from the limit of automating software. There’s a really long, messy middle.”

Truell views the current landscape as just the beginning of a massive platform shift. He concluded, “We are in a market that’s like, you know, had an iPod moment and like it’s going to have an iPhone moment, and another iPhone moment.” He believes his team’s challenge—and opportunity—is to build a company that can not only survive but drive those future revolutions. “We’ve tried to build a company to be a place that can continually build those things, because if we don’t, you know, we’re kaput.”