Factory CEO simply accused his VC board adviser of spying for Cognition
Matan Grinberg, co-founder and CEO of the AI coding startup Factory, mentioned in a post on X on Wednesday that he fired VC Chris Degnan from his function as a board adviser. Grinberg alleges that Degnan shared confidential data with Factory’s greatest competitor, Cognition.
Two hours after Grinberg’s submit, Degnan announced on each X and LinkedIn that he had joined Cognition as its chief earnings officer. He additionally subsequently refuted Grinberg’s allegations, saying in a separate X post that he wasn’t fired however resigned when he instructed Grinberg he was taking the job.
Degnan was Snowflake’s first gross sales rent and later spent 11 years as the info firm’s chief earnings officer. For the previous 5 months, he has been a associate with RPT Partners, a Newport Beach, California, investor in Factory. Degnan can also be a go-to-market adviser to startups on the a lot bigger venture firm Iconiq, a job that dates again to October of final yr.
Three-year-old, San Francisco-based Factory is an agentic coding startup whose AI brokers can perform programming duties largely on their very own. The firm raised $200 million at a $5 billion valuation this month from Khosla Ventures, Blackstone, Sequoia Capital, Insight Partners, and others. Its prospects embrace Nvidia, Blackstone, Royal Bank of Canada, Palo Alto Networks, Adobe, and T-Mobile.
Grinberg mentioned he sees Cognition, the maker of the Devin coding agent, as his greatest competitor. Cognition raised another $2 billion at a $48 billion valuation earlier this month, and counts Mercedes-Benz, NASA, Goldman Sachs, and Citi as prospects.
Grinberg mentioned on X that Degnan had earlier acknowledged having a “informal” dialog with a Cognition govt however had assured Grinberg that he had little interest in working for the competitor. According to Grinberg, Degnan mentioned he had “made an excessive amount of cash” and was “too lazy to go work for Cognition,” which Grinberg mentioned he “trusted and believed.”
On Monday, nevertheless, Degnan apparently disclosed that he had truly been in ongoing talks with Cognition.
This induced Grinberg to develop involved about how a lot confidential data Degnan had about Factory, and the way a lot he had shared and may share sooner or later together with his new employer. He says he fired Degnan as a board adviser on Tuesday, writing:
For weeks, whereas he sat in our board conferences and suggested our management group, he was additionally confiding with executives of our largest competitor. Chris was topic to confidentiality obligations in connection together with his work with Factory. We have no idea the extent of the knowledge he shared, nevertheless it places his well timed questions on our product roadmap and what the parity hole includes into a brand new mild.
But Degnan disputes that account as effectively. He says the final Factory board assembly he attended was weeks earlier than he had “ever spoken” to Cognition and that he hasn’t shared confidential data. Degnan additionally says that when he instructed Grinberg that he was resigning to take the function at Cognition, Grinberg supplied him a full-time job at Factory, which he declined.
Degnan’s post announcing his new job at Cognition doesn’t point out Factory. Very notably, it does say that RPT Partners and the agency’s managing associate, Chad Peets, will now be working with Cognition. “I’m thrilled that Chad and the RPT group can be working carefully with me in our pursuit of constructing a generational firm,” Degnan wrote.
In the previous, pre-AI international stage, a VC agency was particularly cautious to not interact in conflict-of-interest industry. In at present’s international stage, many a VC has invested in direct AI competitors, such OpenAI and Anthropic.
In truth, Khosla Ventures is an investor in each Cognition (since at the very least early 2025) and Factory.
That didn’t cease the enterprise agency’s founder, Vinod Khosla, from leaping into the drama, seemingly in protection of his greater portfolio firm Cognition. Nor did it cease Khosla Ventures associate Keith Rabois from weighing in as effectively — in protection of Factory.
In a post on X, Khosla accused Grinberg of mendacity about firing Degnan. He referred to as Factory a “struggling second tier competitor” and mentioned Grinberg confirmed “no decency or sense of correct conduct,” which “reveals your desperation.”
Grinberg replied that he has e mail receipts to confirm his model of occasions however didn’t share them.
Meanwhile, Rabois opined on X, “It is unethical per se to even interview at a competitor whereas attending Board conferences and Board dinners.” He added that “to even sit for an interview whereas getting access to board degree data and with out resigning is completely insane.”
Tracking the back-and-forth, Cognition co-founder and CEO Scott Wu additionally weighed in on the controversy on X. He politely expressed respect for the smaller competitor whereas insisting that his firm has “little interest in Factory’s information.” Wu additionally contends that Degnan resigned on Monday however didn’t refute that Degnan was in talks with Cognition earlier than that occurred.
Either method, there could possibly be penalties for perceived board-level conflicts of curiosity. VC big Andreessen Horowitz is reportedly the topic of a Justice Department probe into its companions serving on rivals’ boards.
Grinberg argued that startup founders should have the ability to depend on their board members. “Chris’s conduct is unacceptable to me. Trust in Board Membership is among the sacred bonds within the Silicon Valley, one which helps the startup ecosystem thrive. With it comes an infinite duty. That belief was violated.”
Degnan, Peets, Factory, and Khosla Ventures didn’t instantly reply to requests for additional remark.
Note: This story was up to date to incorporate responses from Degnan, Khosla, Rabois, and Wu.
When you buy by hyperlinks in our articles, we may earn a small commission. This doesn’t have an effect on our editorial independence.
