Menlo Ventures backs AI coding startup Factory after Khosla clash
Venture firm Menlo Ventures has publicly announced an investment in AI coding startup Factory, a week after a heated public dispute in which investor Vinod Khosla sharply criticized the company. The move is seen as a vote of confidence in Factory's standing.
Menlo Ventures partner Matt Murphy and his team announced on Monday in a blog post that the firm has invested in AI coding startup Factory. Menlo did not disclose the exact amount but said the investment was part of Factory's funding round announced last month, which valued the company at $5 billion. A source familiar with the matter said the investment was substantial rather than a token gesture, and that Menlo would have put in more had there been room available on the cap table.
Background of the dispute
Ordinarily such news wouldn't be particularly notable, since startups often extend prior funding rounds to bring in new investors. But last week, Factory co-founder and CEO Matan Grinberg sparked a public controversy by claiming he had fired investor Chris Degnan of RPT Partners from his role as board advisor. Grinberg said he feared Degnan may have passed confidential information to Factory's main rival, Cognition — an accusation that followed Degnan's move to Cognition as chief revenue officer.
The dispute drew reactions from numerous tech industry figures, some siding with Degnan and others with Grinberg. The most surprising voice was Vinod Khosla, whose firm has invested in both Factory and Cognition. Despite that dual stake, Khosla called Factory a desperate "struggling second tier competitor" and accused Grinberg of lying about the firing and damaging Degnan's reputation. Degnan disputed Grinberg's account, saying he resigned voluntarily and had turned down a competing job offer from Grinberg.
Menlo's endorsement
Menlo's announcement praised Factory's founders, technology, and customer relationships — a signal that the company is not in the weakened position Khosla suggested. Murphy is known for his early bet on Anthropic when it was seen as a distant second to OpenAI, and has since scored wins with investments in Lovable and Legora. As a result, some investors have begun calling Factory "the next Anthropic." Sequoia's Shaun Maguire, another Factory backer who had publicly defended Grinberg, welcomed Menlo's move. Notably, Menlo holds no stake in rival Cognition.
