San Francisco‑based AI coding startup Factory announced on X that its co‑founder and chief executive, Matan Grinberg, terminated venture capitalist Chris Degnan from a board adviser position after alleging the adviser passed confidential data to Factory’s chief rival, Cognition.
Background on Factory and Cognition
Factory, a three‑year‑old company that builds autonomous coding agents, recently closed a $200 million financing round that valued the firm at $5 billion. The round was led by investors including Khosla Ventures, Blackstone, Sequoia Capital and Insight Partners. Among its customers are Nvidia, Blackstone, the Royal Bank of Canada, Palo Alto Networks, Adobe and T‑Mobile.
Cognition, which markets the Devin coding agent, raised an additional $2 billion earlier this month, pushing its valuation to $48 billion. Its client list features Mercedes‑Benz, NASA, Goldman Sachs and Citi. Grinberg has repeatedly described Cognition as Factory’s primary competitor.
Allegations and Dismissal
According to Grinberg’s X post on Wednesday, Degnan—who previously served as Snowflake’s first sales hire and spent 11 years as that company’s chief revenue officer—had been sitting on Factory’s board while simultaneously discussing matters with executives at Cognition. Grinberg said Degnan had initially assured him that any conversation with Cognition was “casual” and that he had “made too much money” and was “too lazy” to join the rival, statements that Grinberg claimed to have trusted.
Two hours after the post, Degnan announced on both X and LinkedIn that he was joining Cognition as chief revenue officer. In a separate X message, he denied being fired, saying he resigned after informing Grinberg of his new role. Degnan also contended that his last board meeting with Factory occurred weeks before any dialogue with Cognition and that he had not disclosed confidential information.
Grinberg’s announcement described Degnan as having “confidentiality obligations” while “confiding with executives of our largest competitor,” and warned that the extent of any shared information was unknown. He emphasized that trust between founders and board members is a “sacred bond” in Silicon Valley.
Investor Reactions and Industry Context
Degnan had been a partner at Newport Beach‑based RPT Partners for five months and also acted as a go‑to‑market adviser for startups at Iconiq since October of the previous year. In his announcement, Degnan noted that RPT Partners and its managing partner, Chad Peets, would be working with him at Cognition.
The dispute drew comments from several high‑profile investors. Vinod Khosla, founder of Khosla Ventures—a firm that backs both Factory and Cognition—accused Grinberg of lying about the dismissal, labeling Factory a “struggling second‑tier competitor” and suggesting Grinberg’s behavior reflected desperation. Khosla Ventures partner Keith Rabois defended Factory, calling it unethical to interview with a competitor while serving on a board and describing the conduct as “absolutely insane.”
Cognition co‑founder and CEO Scott Wu weighed in, expressing respect for Factory but asserting that Cognition had no interest in its proprietary information. Wu acknowledged Degnan’s resignation but did not dispute that talks with Cognition had occurred before the formal departure.
The episode highlights growing concerns over board‑level conflicts of interest in the fast‑moving AI sector, where venture firms sometimes hold stakes in direct competitors. The article notes that Andreessen Horowitz is reportedly under a Justice Department probe for similar board‑service issues.
Factory, Degnan, RPT Partners and Khosla Ventures have not responded to requests for additional comment as of the time of writing.
Norman Pearlstine is the Executive Editor and Co-Founder at News Raise. With over two decades of experience across financial journalism, corporate governance, and market analysis, Norman leads the editorial direction and ensures strict adherence to journalistic accuracy and ethics.
