The news
The Factory CEO's clash with Cognition spilled into public view on September 30, 2026, when Matan Grinberg, co-founder and chief executive of AI coding startup Factory, accused former board adviser Chris Degnan of confiding in executives at Cognition, Factory's largest competitor, according to TechCrunch.
Degnan, a former chief revenue officer of Snowflake (SNOW), a partner at Factory investor RPT Partners and a go-to-market adviser to startups at Iconiq, had advised Factory's board through RPT Partners, TechCrunch reported. Grinberg alleged that for weeks, while Degnan attended board meetings and advised the leadership team, he was also having conversations with Cognition, and that Degnan had assured him he was not interested in working for the rival.
Degnan disputed that account. He told TechCrunch he resigned rather than being fired, did not share confidential information, and that the last Factory board meeting he attended took place weeks before he spoke with Cognition. Degnan said he told Grinberg about his move to Cognition when he resigned, and that Grinberg responded by asking him to consider a full-time role at Factory, which he declined. TechCrunch reported that Degnan joined Cognition as chief revenue officer. Cognition co-founder and CEO Scott Wu denied any interest in Factory's information, TechCrunch reported.
The dispute pulled in investors. Vinod Khosla, whose firm Khosla Ventures backs both Factory and Cognition, called Factory a struggling second-tier competitor showing desperation, and accused Grinberg of lying about firing Degnan, according to TechCrunch. Keith Rabois, a Khosla Ventures partner, took a different line, saying that interviewing at competitors while sitting on a board is unethical in itself.
On October 5, Menlo Ventures partner Matt Murphy announced in a blog post that Menlo had invested in Factory as part of the funding round announced in September, TechCrunch reported. The amount was not disclosed; TechCrunch said Menlo described the check as significant and said it would have invested more if the cap table had allowed. Sequoia's Shaun Maguire, a Factory backer, also publicly supported Grinberg.
The context is a fierce race. Factory raised $200 million at a $5 billion valuation in September from investors including Khosla Ventures, Blackstone (BX) and Sequoia, while Cognition raised $2 billion at a $48 billion valuation earlier that month, according to TechCrunch.
The numbers
- Factory round (September)
- $200 million at $5 billion valuation
- Cognition round (September)
- $2 billion at $48 billion valuation
- Menlo investment
- Not disclosed
Why CEOs should care
For founders, the lesson is about who sits in the room. Board advisers and observers often get the same strategy, pipeline and product detail as directors, but with fewer formal duties. Ask whether every adviser has signed confidentiality terms, whether they must disclose talks with competitors, and how quickly access is cut off when someone leaves. Write those rules down before you need them.
Boards and general counsel should also look at investor conflicts. Khosla Ventures backs both Factory and Cognition, which is common in hot markets where firms spread bets. That arrangement can work, but the public comments here show how fast it can turn awkward. Founders raising now should ask prospective investors which competitors they hold, what information barriers they keep, and whether partners will speak publicly about portfolio companies.
For enterprise buyers of AI coding agents, the episode is mostly noise, but it carries one signal: these vendors are fighting hard over talent, executives and customers. Expect aggressive pricing and poaching, and ask any vendor how it protects the code and data you share from staff who may soon work for a rival.
The bigger picture
AI coding agents, tools that write, test and fix software with limited human supervision, have become one of the most heavily funded corners of venture capital. Rounds in the billions have raised the stakes of every hire and every board seat, and disputes that once stayed private are now playing out on social media.
Menlo's decision to invest in the middle of the feud reads as a public vote of confidence in Grinberg. It also shows that in a hot market, a messy public fight does not necessarily scare off capital.
What’s next
With Degnan now at Cognition as chief revenue officer, according to TechCrunch, watch whether either side takes legal action and whether Factory changes its board or adviser arrangements. Factory's next customer and revenue disclosures will show whether the spat has any commercial cost.
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