Revenue doubled in 4 months, 66 times sales ratio, "the hottest AI programming tool" Cursor valued at 10 billion USD

The AI programming assistant Cursor has recently become a hot topic in the technology and finance sectors. This startup, founded just three years ago, has doubled its revenue in just four months, with an annual recurring revenue (ARR) exceeding $150 million.According to Bloomberg, Cursor is in talks with investors for a new round of financing, with a valuation potentially reaching $10 billion. This 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 power Cursor.Nevertheless, Cursor has won widespread acclaim from developers for its ease of use, speed, and deep understanding of user codebases. The Information reports that many companies, including the card startup Ramp and the AI search engine Perplexity, are using Cursor to enhance development efficiency.Cursor offers three subscription models: free, $20/month, and $40/month, which provides a significant pricing advantage compared to competitor Devin's $500/month pricing.In December last year, Cursor secured $100 million in funding from well-known investment firms such as Thrive Capital (a major supporter of OpenAI), Andreessen Horowitz, and Benchmark, reaching a valuation of $2.5 billion. OpenAI's startup fund and Neo also participated in the investment.The Logic Behind the High Valuation: Is a 66x Price-to-Sales Ratio Crazy?Cursor's rapid rise also reflects the capital market's enthusiasm for AI application layer companies. Despite relying on underlying model suppliers, application layer companies have still garnered capital favor due to rapid revenue growth. The Information points out that Cursor's revenue growth rate has already surpassed that of the previous generation of software startups.At a $10 billion valuation, Cursor's price-to-sales ratio (valuation/annual recurring revenue) is approximately 66x. Although this number seems high, it is not an isolated case in the current AI investment frenzy. Data from The Information shows that a 66x price-to-sales ratio is consistent with recent investments in other high-profile AI startups.Intensifying Competition: Challenges for CursorCursor's rapid development has also intensified competition in the AI programming assistant market. Both OpenAI and Anthropic are actively launching their own code editing tools.The Information reports that Cursor initially used OpenAI's models but switched its default model to Anthropic in July.A few months later, OpenAI launched a code editing tool called Canvas in ChatGPT. Last week, Anthropic also released its own code editor, Claude Code. Additionally, OpenAI is developing a more advanced coding assistant product aimed at replicating the work of senior software engineersIn addition to OpenAI and Anthropic, other startups are also actively positioning themselves. Last month, Kleiner Perkins led a funding round for Codeium, which is valued at nearly $3 billion. Similar to Cursor, Codeium raised $150 million a few months ago at a valuation of $1.25 billion. Poolside is also developing coding assistant applications and models, and although the company generated less than $10 million in revenue last year, it may seek a valuation of $5 billion in future funding rounds