Benchmark Partners Expect Rival Conflicts as Factory and Cognition Feud

Three Benchmark partners said on Oct. 15 that the venture rule against backing two head-on competitors is under strain from AI, and that conflicts are becoming a matter of necessity rather than preference. Fifteen days earlier, a public fight between two Khosla Ventures portfolio companies, Factory and Cognition, showed what a conflict looks like when it arrives.

The Benchmark remarks come from TechCrunch's report from Disrupt by Editor in Chief Connie Loizos. The Factory dispute is covered in TechCrunch's Sept. 30 account and by Runtime Wire. None of it is settled, and the allegations have not been independently established.

What Benchmark's partners said

Benchmark built its reputation on 10-year to 15-year partnerships with early-stage founders, so its position carries more weight than a firm that buys stock in many companies. Partner Eric Vishria told the Disrupt audience: "The harsh reality of this world is every company is evolving very quickly." He added that "you are going to get conflicts, and that's just the reality of the current dynamic." He also called exclusivity "really important" at the early stage Benchmark favors, but said "things are evolving."

Partner Chetan Puttagunta tied the problem to the cost of software. As that cost "effectively goes to zero," founders become "incredibly ambitious" and want to claim more "surface area," so "[i]t's probably going to happen more, where you start to run into each other." Direct competitors at the outset are "an easy answer," he said, but drift over time is something that "happens."

Partner Peter Fenton called the issue "kryptonite" and the firm's toughest problem. He described a spectrum from co-founders who would never back a competitor to public-market stock pickers who can own rivals, and placed Benchmark nearer the co-founder end. His rule is transparency: "There shouldn't be the surprise after the fact."

TechCrunch adds that OpenAI and Anthropic share dozens of the same investors, which is the largest version of the same overlap.

The Factory and Cognition timeline

Factory is a San Francisco agentic coding startup, which builds software that writes code on its own. Per TechCrunch, it raised $200 million at a $5 billion valuation in September from investors including Khosla Ventures, Blackstone, Sequoia Capital and Insight Partners. Cognition, which makes the Devin coding agent, raised $2 billion at a $48 billion valuation in the same month.

Company	Round	Valuation	Shared investor
Cognition	$2 billion	$48 billion	Khosla Ventures
Factory	$200 million	$5 billion	Khosla Ventures

Cognition's valuation is 9.6 times Factory's, and its round was ten times larger. The Terminal calculated both ratios from TechCrunch's figures.

The dispute ran over three days, according to TechCrunch. On Monday, Sept. 28, Chris Degnan resigned as a Factory board adviser and told Factory CEO Matan Grinberg he was joining Cognition. On Tuesday, Grinberg says, he fired Degnan. On Wednesday, Sept. 30, Grinberg posted allegations on X, and about two hours later Degnan announced on X and LinkedIn that he had become Cognition's chief revenue officer.

Degnan was Snowflake's first sales hire and later its chief revenue officer for 11 years. TechCrunch lists him as a partner at RPT Partners, a Newport Beach, California firm that invests in Factory, and as a go-to-market adviser to Iconiq.

Who says what

Grinberg alleges that Degnan shared confidential information with Cognition, which Grinberg calls his biggest competitor. He says Degnan earlier described a conversation with a Cognition executive as "casual" and said he was "too lazy to go work for Cognition." Degnan says he resigned rather than being fired, that his last Factory board meeting came weeks before he spoke to Cognition, and that he shared nothing confidential.

Cognition co-founder and CEO Scott Wu said Cognition has "no interest in Factory's info" and said Degnan resigned Monday without denying earlier talks. Khosla Ventures founder Vinod Khosla accused Grinberg of lying about the firing and called Factory "a struggling second tier competitor." Khosla Ventures partner Keith Rabois wrote that it is "unethical per se" to interview at a competitor while attending board meetings and dinners. The firm has invested in both companies.

Two different conflicts

The Benchmark partners and the Factory dispute describe different problems. Benchmark is discussing an investor holding stock in two rivals, where the risk is divided loyalty and the remedy is disclosure. Factory's complaint is about information: an adviser sat in board discussions and then joined a competitor.

They meet at Khosla Ventures, which sits on both cap tables and has partners on opposite sides in public. Fenton's "no surprise" rule would not obviously have prevented the Degnan episode, because Grinberg says Degnan had assured him he had no interest in the Cognition job. Puttagunta's argument about software costs fits the pair: Runtime Wire says Factory and Cognition compete for the same enterprise coding-agent budgets.

The counter-case is that this is one personnel dispute, not a trend. TechCrunch reports that Benchmark is not declaring the rule dead, and Vishria said the firm stays committed to each founder and keeps what it learns confidential. TechCrunch's Sept. 30 article also mentions a reported Justice Department probe into Andreessen Horowitz over partners serving on competitors' boards, and does not say it is connected to this case. Capital is also concentrating in few large rounds: three cybersecurity rounds took $1.8 billion of the $6.8 billion raised in the third quarter, and Ramp's $1.85 billion round was priced at about 30 times revenue.

Grinberg said he has email records supporting his account but did not share them, per TechCrunch. Until he does, or Degnan and Cognition publish their own, the public record is two accounts of a three-day sequence.