Matan Grinberg, the co-founder and CEO of the AI development startup Factory, revealed on X that he terminated the contract of VC Chris Degnan from his position as a board advisor. Grinberg claims Degnan disclosed sensitive details to Factory’s main rival, Cognition.
Shortly after, Degnan announced on X and LinkedIn that he would be joining Cognition as its chief revenue officer.
Previously, Degnan was Snowflake’s inaugural sales team member and later held the chief revenue officer position for 11 years. He has most recently served as a partner at RPT Partners, a Newport Beach, California-based investment firm in Factory, for the past five months. His LinkedIn profile also notes that he serves as a go-to-market advisor for startups at the larger venture firm Iconiq, a role established last October.
Founded three years ago, the San Francisco-based Factory specializes in coding innovations and utilizes AI agents to autonomously handle programming tasks. The company recently secured $200 million at a valuation of $5 billion from investors including Blackstone, Khosla Ventures, Sequoia Capital, and Insight Partners. Its clients encompass major companies such as Nvidia, Blackstone, the Royal Bank of Canada, Palo Alto Networks, Adobe, and T-Mobile.
Grinberg identified Cognition, the creator of the Devin coding agent, as his primary competition. Earlier this month, Cognition attracted an additional $2 billion in funding, reaching a valuation of $48 billion, with clients that include Mercedes-Benz, NASA, Goldman Sachs, and Citi.
Grinberg stated on X that Degnan had confessed to him about a “casual” interaction with an executive from Cognition, assuring Grinberg he was not interested in pursuing a job there. Degnan had claimed he had “made too much money” and was “too lazy to go work for Cognition,” a statement that Grinberg trusted. However, on Monday, Degnan revealed he had been in ongoing discussions with Cognition, raising concerns for Grinberg about how much sensitive information Degnan had about Factory and what he might share with his new employer.
This led Grinberg to question the confidentiality of Degnan’s prior contributions and ultimately led to his dismissal from the board. Grinberg commented:
“For weeks, while he was actively participating in our board meetings and giving advice to our leadership team, he was simultaneously discussing matters with executives from our largest competitor. Chris was bound by confidentiality agreements related to his role at Factory. We cannot ascertain the full scope of the information he shared, but it casts a different light on his timely inquiries about our product strategy and competitive gaps.”
Degnan’s announcement regarding his new role at Cognition did not reference Factory, but notably mentioned that RPT Ventures and its managing partner, Chad Peets, would now collaborate closely with Cognition. “I am excited that Chad and the RPT team will be working with me in our effort to build a generational company,” Degnan stated.
In the previous business landscape before AI proliferation, venture capital firms exercised extreme caution to avoid conflicts of interest. However, in the current environment, many VCs find themselves invested in direct competitors in the AI sector, such as OpenAI and Anthropic.
Nonetheless, perceived conflicts of interest at the board level could have repercussions. It has been reported that the VC firm Andreessen Horowitz is under investigation by the Justice Department for having its partners serve on the boards of competing companies.
Grinberg emphasized the necessity for startup founders to trust their board members. “Chris’s actions are unacceptable to me. Trust in board membership is a foundational element in Silicon Valley, crucial for the startup ecosystem’s growth. This bond entails significant responsibility, and that trust has been breached.”
Degnan, Peets, and Factory have not yet responded to requests for further comments.
