By Titik Puspa 
A dramatic public feud has erupted in the hyper-competitive AI coding startup landscape, pitting Factory, a rising star valued at $5 billion, against its formidable rival, Cognition, now commanding a staggering $48 billion valuation. The conflict ignited when Matan Grinberg, co-founder and CEO of Factory, publicly accused Chris Degnan, a prominent venture capitalist and Factory’s board advisor, of betraying his trust by allegedly sharing confidential information with Cognition, the maker of the highly touted Devin coding agent. The allegations, disseminated via a post on X (formerly Twitter) on Wednesday, sent shockwaves through the tech community, prompting swift and contentious responses from all parties involved.
Grinberg’s explosive claim centered on Degnan’s alleged breach of confidentiality, stating, "For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor. Chris was subject to confidentiality obligations in connection with his work with Factory. We do not know the extent of the information he shared, but it puts his timely questions about our product roadmap and what the parity gap involves into a new light." This accusation implies Degnan may have leveraged his privileged access to Factory’s strategic discussions to benefit Cognition, potentially compromising Factory’s competitive edge.
The situation escalated dramatically just two hours after Grinberg’s post. Degnan, a seasoned executive with a significant track record in sales and revenue leadership, took to both X and LinkedIn to announce his new role as Chief Revenue Officer at Cognition. In a subsequent post on X, Degnan vehemently refuted Grinberg’s narrative, asserting that he was not fired but rather resigned from his board advisor position on Monday, the same day he informed Grinberg of his impending move to Cognition. According to Degnan, Grinberg’s response was not one of termination but an offer for a full-time position at Factory, which Degnan declined. Degnan’s statement directly contradicted Grinberg’s claim of termination, stating, “You did not terminate me. I resigned from my advisor position on Monday and told you I was going to Cognition. In response, you asked me to consider a full time role at Factory. I told you I wasn’t interested.”
Degnan’s professional pedigree lends considerable weight to his involvement in the AI coding space. He was Snowflake’s inaugural sales hire and subsequently served for eleven years as the data cloud company’s Chief Revenue Officer, a testament to his expertise in scaling go-to-market strategies. For the past five months, Degnan had also been a partner at RPT Partners, an investor in Factory, and a go-to-market advisor to startups at the prominent venture capital firm Iconiq, a role he assumed in October of the previous year. This multifaceted involvement positions him as a significant figure with deep insights into multiple players within the tech ecosystem.
Factory, a three-year-old San Francisco-based startup, has rapidly established itself as a leader in agentic coding. Its AI agents are designed to autonomously execute programming tasks, a capability that has garnered significant investor attention. The company recently secured $200 million in funding, achieving a formidable $5 billion valuation. This funding round saw participation from major venture capital firms including Khosla Ventures, Blackstone, Sequoia Capital, and Insight Partners. Factory’s impressive customer roster includes industry giants such as Nvidia, Blackstone, Royal Bank of Canada, Palo Alto Networks, Adobe, and T-Mobile, underscoring its traction and the perceived value of its technology.
The rivalry between Factory and Cognition is particularly intense. Grinberg explicitly identifies Cognition, the developer of the sophisticated Devin AI coding agent, as his company’s principal competitor. Cognition’s recent funding round further highlights its dominant market position, raising an additional $2 billion at an astonishing $48 billion valuation. This substantial capital infusion signals robust investor confidence in Cognition’s trajectory and its ability to capture a significant share of the burgeoning AI coding market. Cognition’s client base is equally impressive, featuring names like Mercedes-Benz, NASA, Goldman Sachs, and Citi.
The core of Grinberg’s accusation lies in Degnan’s alleged duplicity. Grinberg recounted that Degnan had previously disclosed a "casual" conversation with a Cognition executive but had assured Grinberg of his lack of interest in working for the competitor. Degnan’s purported reasoning at the time, as relayed by Grinberg, was that he had "made too much money" and was "too lazy to go work for Cognition," sentiments Grinberg claims to have "trusted and believed." However, this perceived sincerity appears to have been shattered by Degnan’s subsequent actions, as he apparently disclosed ongoing discussions with Cognition on Monday. This revelation, according to Grinberg, triggered concerns about the extent of confidential information Degnan possessed about Factory and the potential for its future dissemination to his new employer.
Grinberg’s statement further elaborated on the perceived conflict of interest: “For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor. Chris was subject to confidentiality obligations in connection with his work with Factory. We do not know the extent of the information he shared, but it puts his timely questions about our product roadmap and what the parity gap involves into a new light.” This sentiment highlights the critical importance of trust and confidentiality in the delicate relationships between startups and their advisors.
Degnan, however, presented a starkly different account of events. He asserted that the last Factory board meeting he attended occurred weeks before any discussions with Cognition took place, and he unequivocally denied sharing any confidential information. Furthermore, Degnan stated that when he informed Grinberg of his resignation to accept the role at Cognition, Grinberg attempted to recruit him for a full-time position at Factory. This detail, if accurate, paints a picture of Grinberg’s desperation to retain Degnan’s expertise, or perhaps an attempt to mitigate the fallout from Degnan’s departure.
Degnan’s LinkedIn and X posts announcing his new role at Cognition conspicuously omitted any mention of Factory. However, the posts did highlight that RPT Partners and its managing partner, Chad Peets, would now be collaborating with Cognition. "I am thrilled that Chad and the RPT team will be working closely with me in our pursuit of building a generational company," Degnan wrote, signaling a strategic alignment with his new employer and its broader network.
The controversy touches upon a broader trend in the venture capital industry, particularly in the AI sector. Historically, VC firms exercised extreme caution to avoid conflicts of interest, especially when investing in competing companies. However, in the current AI-driven investment climate, a growing number of VCs are actively backing direct AI competitors, a phenomenon exemplified by firms investing in both OpenAI and Anthropic. This new paradigm suggests a shift in traditional investment ethics, driven by the rapid pace of innovation and the perceived winner-take-all nature of certain AI markets.
Adding another layer of complexity to this unfolding drama, Khosla Ventures, a significant investor in both Factory and Cognition, found its principals publicly engaged in the dispute. Vinod Khosla, the founder of Khosla Ventures, publicly accused Grinberg of fabricating the story of Degnan’s termination. He characterized Factory as a "struggling second tier competitor" and asserted that Grinberg’s actions demonstrated "no decency or sense of proper behavior," attributing it to "desperation." Grinberg, in response, claimed to possess email evidence to support his version of events, though he did not publicly share it.
Keith Rabois, a partner at Khosla Ventures, also weighed in, expressing strong opinions on the ethical implications of Degnan’s alleged actions. Rabois opined on X, "It is unethical per se to even interview at a competitor while attending Board meetings and Board dinners." He further elaborated, stating, "to even sit for an interview while having access to board level information and without resigning is absolutely insane." Rabois’s comments underscore the perceived gravity of board-level conflicts of interest within the startup ecosystem.
The potential ramifications of such conflicts are not to be underestimated. Andreessen Horowitz, another prominent VC firm, is reportedly under investigation by the Department of Justice concerning its partners’ board memberships across competing companies. This regulatory scrutiny suggests that the boundaries of acceptable conduct in venture capital are being increasingly scrutinized, especially in rapidly evolving technological sectors.
Scott Wu, co-founder and CEO of Cognition, also addressed the controversy on X. While expressing respect for Factory as a smaller competitor, Wu maintained that his company possesses "no interest in Factory’s info." He corroborated Degnan’s account that Degnan resigned on Monday, not fired on Tuesday, but did not deny that Degnan was in discussions with Cognition prior to his resignation. This subtle distinction, while seemingly minor, reinforces Degnan’s narrative of a voluntary departure.
Grinberg concluded his public statements by emphasizing the foundational importance of trust in board membership, stating, "Chris’s conduct is unacceptable to me. Trust in Board Membership is one of the sacred bonds in the Silicon Valley, one that helps the startup ecosystem thrive. With it comes an enormous responsibility. That trust was violated.” His words underscore the deeply ingrained norms of trust and integrity that have historically underpinned the Silicon Valley’s success.
As of this report, Degnan, Peets, Factory, and Khosla Ventures had not provided further immediate comment on the evolving situation. The dispute, however, has exposed the raw competition and ethical complexities inherent in the fast-paced world of AI development, where innovation, valuation, and investor loyalty are constantly being redefined. The ongoing saga between Factory and Cognition, with Degnan at its epicenter, serves as a stark reminder of the high stakes involved and the intense scrutiny faced by both startups and the venture capital firms that fuel them. The outcome of this public disagreement could have lasting implications for how board advisory roles and potential conflicts of interest are managed in the future of the tech industry.
