Boardroom Drama Unfolds at AI Startup Factory Amid Allegations of Corporate Espionage
Matan Grinberg, co-founder and CEO of the AI coding startup Factory, publicly accused venture capitalist Chris Degnan of sharing confidential information with Factory’s largest competitor, Cognition. The allegations came in a post on X on Wednesday, where Grinberg announced he had fired Degnan from his role as a board adviser due to concerns over a conflict of interest and potential breach of confidentiality.
Just two hours after Grinberg’s announcement, Degnan took to X and LinkedIn to reveal that he had joined Cognition as its chief revenue officer. Degnan refuted the firing claims, stating in a subsequent X post that he resigned voluntarily after informing Grinberg about his new role. According to Degnan, the last Factory board meeting he attended was weeks before any discussions with Cognition, and he denies sharing any confidential information.
Background on the Key Players
Chris Degnan is a seasoned sales executive, notably Snowflake’s first sales hire and former chief revenue officer for over a decade. Prior to joining Cognition, he had been a partner at RPT Partners—an investor in Factory—and a go-to-market advisor for Iconiq, a prominent venture firm, since October 2025.
Factory, a three-year-old San Francisco-based startup, specializes in AI-driven coding agents capable of autonomously handling programming tasks. The company recently secured $200 million in funding at a $5 billion valuation from investors including Khosla Ventures, Blackstone, and Sequoia Capital. Its client roster features major enterprises such as Nvidia, Adobe, and T-Mobile.
Cognition, Factory’s main competitor in the AI coding space, produces the Devin coding agent. The firm closed a $2 billion funding round this month, valuing it at $48 billion. Cognition’s customers include high-profile names like Mercedes-Benz, NASA, and Goldman Sachs.
The Conflict: Allegations and Denials
Grinberg’s post on X described how Degnan had previously downplayed any intentions to work for Cognition, even stating he was “too lazy” and had “made too much money” to join the rival. However, it emerged that Degnan had been in ongoing talks with Cognition, which raised red flags about the extent of confidential information he might have shared or could share moving forward.
“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.”
Degnan countered by emphasizing that he had not attended any board meetings after discussions with Cognition began and firmly denied leaking any confidential data. He also mentioned that upon informing Grinberg of his resignation, he was offered a full-time role at Factory, which he declined.
Venture Capital Firms and the Blurred Lines of Loyalty
This incident highlights the increasingly complex dynamics in the AI startup ecosystem, where venture firms often back competing companies. Khosla Ventures, an investor in both Factory and Cognition, exemplifies this trend.
Vinod Khosla, founder of Khosla Ventures, entered the fray via X, defending Cognition and criticizing Factory and Grinberg. Khosla called Factory “a struggling second tier competitor” and accused Grinberg of dishonesty and desperation.
Conversely, Khosla Ventures partner Keith Rabois sided with Factory’s stance, condemning any form of interviewing with a competitor while still attending board meetings. Rabois called such actions “unethical per se” and “absolutely insane.”
Responses from Cognition and Industry Implications
Scott Wu, Cognition’s co-founder and CEO, acknowledged the controversy on X with a respectful tone toward Factory. Wu insisted that Cognition has “no interest in Factory’s info” and confirmed that Degnan resigned on Monday. However, Wu did not deny that talks between Degnan and Cognition had taken place earlier.
The situation underscores a broader concern about conflicts of interest at the board level within the tech and venture capital worlds. Recently, Andreessen Horowitz has come under Justice Department scrutiny over similar issues involving partners serving on competing companies’ boards.
Trust and Ethics in Silicon Valley Boards
Grinberg emphasized the sacred nature of trust between startup founders and board members, calling Degnan’s conduct “unacceptable.” He stressed that such trust is vital for the health and success of Silicon Valley’s startup ecosystem, where board members hold significant responsibility.
As this dispute unfolds, neither Degnan, RPT Partners managing partner Chad Peets, Factory, nor Khosla Ventures have issued further comments beyond their initial statements.
Note: This story was updated to include responses from Degnan, Khosla, Rabois, and Wu.
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