Menlo Ventures Invests in Factory After Public Dispute With Khosla

Menlo Ventures has invested in AI coding startup Factory, adding a prominent new backer shortly after the company became involved in a public dispute over a former board adviser and rival Cognition.

Menlo did not disclose the size of its investment, but said it participated in Factory’s latest financing. In a blog post announcing the deal, the venture firm praised Factory’s founders, technology and enterprise traction.

Menlo joins Factory at a $5 billion valuation

Factory announced its latest funding round last month at a $5 billion valuation. Menlo’s investment was made as part of that financing rather than through a separate new round.

The backing is notable because it follows an unusually public dispute involving Factory CEO Matan Grinberg and Chris Degnan, a former Factory board adviser who later joined competing AI coding company Cognition as chief revenue officer.

Factory’s dispute drew prominent investors into the debate

Grinberg said he removed Degnan as an adviser because he feared confidential information could be shared with Cognition. Degnan disputed that account, saying he resigned from the role.

The disagreement quickly drew comments from prominent venture investors. Vinod Khosla, whose firm has investments in both Factory and Cognition, publicly criticised Factory and disputed Grinberg’s description of the events. Other investors defended Factory, turning the disagreement into a broader industry debate over the fast-growing AI coding market.

Investor Nichole Wischoff was among those discussing the significance of Menlo’s backing after the dispute, highlighting the investment publicly on X.

Menlo’s backing gives Factory a high-profile endorsement

Menlo partner Matt Murphy has built a strong recent track record in AI investing, including the firm’s early commitment to Anthropic. Its decision to back Factory therefore carries added weight as the startup competes in an increasingly crowded market for autonomous software-development tools.

Sequoia partner Shaun Maguire, an existing Factory investor who previously supported Grinberg during the dispute, also welcomed Menlo’s involvement, saying the firm was “on a tear”.

Menlo is not an investor in Cognition, which makes its Factory investment distinct from firms with financial exposure to both competitors. For Factory, the new backing provides another major institutional endorsement as it tries to convert rapid growth in AI coding into a durable enterprise software business.