Menlo Ventures Invests in Factory After Khosla's Public Attack

Menlo Ventures confirmed Monday that it has invested in AI coding startup Factory, a move that landed days after venture investor Vinod Khosla publicly called the company a "struggling second tier competitor," according to TechCrunch. Menlo partner Matt Murphy announced the stake in a blog post that praised Factory's founders, technology, and customer relationships, TechCrunch reported.

What sparked the dispute between Factory and Chris Degnan?

The public conflict began last week when Factory co-founder and CEO Matan Grinberg said he had fired investor Chris Degnan from his role as a board advisor, according to TechCrunch. Grinberg said he feared Degnan may have shared confidential information with Cognition, a rival AI coding company Degnan had just joined as chief revenue officer. Degnan disputed that account, telling TechCrunch he had resigned rather than been fired, and that he had turned down a competing job offer from Grinberg before leaving.

What did Vinod Khosla say about Factory?

Khosla, whose firm has backed both Factory and Cognition, weighed in publicly on the dispute despite that dual stake, TechCrunch reported. He called Factory a "struggling second tier competitor" and accused Grinberg of lying about firing Degnan and of impugning Degnan's character, according to the outlet. The remarks drew responses from other tech figures who sided with either Degnan or Grinberg, TechCrunch reported, without Khosla's firm issuing a further statement cited in the source material.

What did Menlo Ventures announce, and when?

Menlo's blog post, published Monday, framed the investment as part of Factory's funding round from last month, which valued the company at $5 billion, according to TechCrunch. Menlo declined to disclose the size of its check. A source described to TechCrunch as familiar with the deal said the investment was significant to Menlo rather than a token gesture, and that the firm would have put in more money had there been room left on Factory's cap table. TechCrunch noted that extending a prior funding round to add a new investor is not unusual on its own — what made this instance notable was the timing, arriving directly after Khosla's public criticism.

How does Menlo's track record factor into the reaction?

Murphy has a history of early, contrarian bets, according to TechCrunch, which pointed to his firm's investment in Anthropic at a point when the company looked like an also-ran to OpenAI. Menlo has since backed Lovable and Legora, the outlet reported. TechCrunch said some venture investors are now describing Factory as "the next Anthropic" in the wake of Menlo's endorsement, though the piece did not attribute that specific phrase to a named individual beyond general investor sentiment.

What are other Factory investors saying?

Sequoia partner Shaun Maguire, also a Factory backer, had already voiced support for Grinberg on X before Menlo's announcement, according to TechCrunch. Maguire responded to Menlo's move by saying the firm is "on a tear," the outlet reported. TechCrunch also noted that Menlo is not an investor in Cognition, distinguishing its position from Khosla's firm, which holds stakes in both companies.

What should readers watch next?

• Whether Menlo discloses the dollar size of its stake in Factory beyond confirming participation in the $5 billion round, per TechCrunch.
• Whether Khosla or his firm issue any further public comment responding to Menlo's endorsement.
• Whether Cognition or Chris Degnan respond directly to Menlo's characterization of Factory's standing.
• Whether additional investors publicly take sides as the Factory-Cognition rivalry continues to play out.

The dispute, as reported by TechCrunch, remains centered on contested accounts: Grinberg's claim that he fired Degnan over a confidentiality concern, and Degnan's account that he resigned after declining a counteroffer. TechCrunch's reporting did not include a response from Cognition itself, and no further comment from Khosla's firm appeared in the source material reviewed for this report. Readers seeking the full account, including direct statements attributed to each party, can consult the original TechCrunch article.