Cursor vs. Copilot: a masterclass in embedded AI strategy
How two different paths led to $100M ARR—and what founders can learn from them
If embedded UX is the future of AI, then Cursor and Copilot are the case studies every founder should study—and every investor should understand.
Both are AI coding assistants.
Both hit $100M+ ARR.
But how they got there? That’s the lesson.
Cursor: AI-native, platform-flexible, hypergrowth
Cursor didn’t just embed AI—it rebuilt the IDE around it.
It’s a fork of VS Code, but fundamentally different:
Tab completions, multi-file edits, and chat are all natively embedded
No bolted-on feel. No plugin friction. Just flow-state superpowers.
Cursor hit $100M ARR in 12 months
With fewer than 20 employees
And zero marketing spend
(Source: NextBigFuture, Feb 8, 2025)
What made it work?
Embedded UX that’s invisible and indispensable
Multi-model support (GPT-4o, Claude, open API keys)
Platform hedge via multi-IDE support (not just VS Code)
Product-led growth inside real developer workflows
It’s a rare beast: a standalone app with embedded UX that feels native and flexible.
Copilot: wide reach, slower compounding
GitHub Copilot took a different path: plugin-first, not IDE-native.
It integrates with popular editors like VS Code and JetBrains.
Suggestions appear inline, chat tools are added in—but it’s still an add-on, not a rethinking of the developer experience.
Copilot’s growth is real:
Tied deeply to Microsoft’s ecosystem
Backed by GitHub’s 100M+ users
Estimated to have crossed $100M+ ARR in ~2.5 years
But here’s the catch:
Less hedged—locked into OpenAI + Microsoft infra
Slower product evolution—less control over UX
Platform risk—subject to IDE and API decisions it can’t control
In short: Copilot grows by distribution. Cursor grows by embedding.
Why Cursor’s model matters
Cursor reached $100M ARR 3x faster than Copilot—because it:
Embedded AI deeply, not just functionally
Controlled its environment
Let users choose their own infra
Moved at product speed, not partnership speed
And it did all this as a default-download product in a notoriously skeptical dev market.
That tells you everything.
The real lesson? Embedding isn’t just UX. It’s strategy.
A retention moat. A platform hedge. A monetization unlock.
The founder takeaway
If you’re building with AI:
Don’t just bolt it on—build it in
Hedge against infra/platform dependencies early
Aim for AI-native UX that feels like magic, not middleware
Standalone tools struggle. Plugins grow slowly.
But products that embed deeply—like Cursor—can sprint past them.
The investor takeaway
I don’t just ask “is this AI embedded?”
I ask:
Who controls the user experience?
Who owns the loop between problem and solution?
How fast can they compound with no external blockers?
The most exciting AI startups I see today?
They embed like Cursor, but hedge like they're building for the next platform war.