AI programming assistant Cursor has recently become a hot topic in the technology and financial fields. This three-year-old startup has tripled its revenue in just four months, with annualized recurring revenue (ARR) exceeding $150 million. According to Bloomberg, Cursor is negotiating with investors for a new round of financing that could value it as high as $10 billion. That figure is four times its valuation three months ago.

Anysphere (Cursor’s parent company) does not develop its own generative AI models, but relies on models from Anthropic and OpenAI to drive Cursor.

Nonetheless, Cursor has won widespread praise from developers for its ease of use, speed, and deep understanding of users' code bases. "The Information" reported that many companies, including card startup Ramp and AI search engine Perplexity, are using Cursor to improve development efficiency.

Cursor offers three subscription models: free, $20/month, and $40/month. Compared with competitor Devin’s monthly pricing of $500, Cursor has a clear price advantage.

In December last year, Cursor received US$100 million in financing from well-known investment institutions such as Thrive Capital (a major supporter of OpenAI), Andreessen Horowitz and Benchmark, with a valuation reaching US$2.5 billion. OpenAI’s Venture Fund and Neo also participated in the investment.

The logic behind high valuations: Is a price-to-sales ratio of 66 times crazy?

The rapid rise of Cursor also reflects the capital market’s pursuit of AI application layer companies. Despite their dependence on underlying model suppliers, application layer companies still gain the favor of capital with their rapid revenue growth."The Information" pointed out that Cursor's revenue growth has exceeded the previous generation of software startups.

At a $10 billion valuation, Cursor’s price-to-sales ratio (valuation/annualized recurring revenue) is approximately 66 times. Although this number seems high, it is not unique in the current AI investment boom. Data from "The Information" shows that the price-to-sales ratio of 66 times is basically consistent with recent investments in other high-profile AI startups.

Competition intensifies, Cursor faces challenges

The rapid development of Cursor has also intensified competition in the AI ​​programming assistant market. Both OpenAI and Anthropic are actively launching their own code editing tools.

"The Information" reported that Cursor initially used OpenAI's model, but changed the default model to Anthropic in July.

A few months later, OpenAI launched a code editing tool called Canvas in ChatGPT. Last week, Anthropic also launched its own code editor, ClaudeCode. In addition, OpenAI is also developing a more advanced coding assistant product designed to replicate the work of senior software engineers.

In addition to OpenAI and Anthropic, other startups are also actively deploying. Last month, Kleiner Perkins led an investment in Codeium, valuing it at nearly $3 billion. Codeium, like Cursor, also raised $150 million a few months ago at a $1.25 billion valuation. Poolside is also developing a coding assistant app and model, and despite generating less than $10 million in revenue last year, the company may seek a $5 billion valuation in future funding.