Factory CEO Fires Board Advisor Over Secret Talks With Rival AI Startup Cognition
A major public dispute broke out in the US AI sector after Factory CEO Matan Greenberg fired board advisor Chris Degnan for secretly negotiating with competitor Cognition.
A fierce public clash has erupted within the American artificial intelligence industry after Matan Greenberg, the Israeli CEO and founder of Factory—a company developing AI agents for code writing—announced in a viral post that he was immediately terminating the role of Chris Degnan, who had served for over a year as an advisor and board observer.
According to Greenberg, the decision stemmed from behind-the-scenes negotiations conducted by Degnan with Cognition, the developer of the Devin code agent, one of the hottest AI companies today and a direct competitor to Factory.
However, the affair did not end with the termination notice. Cognition CEO Scott Wu published a public response denying the allegations, while Degnan himself announced that he was joining Cognition as Chief Revenue Officer (CRO).
"I Thought It Was a Casual Conversation, It Turned Out the Talks Lasted Weeks"
In his post on X, Greenberg described how his relationship with Degnan deteriorated, characterizing him not only as a trusted advisor but also as a close friend. According to Greenberg, Degnan initially told him that he had a casual, one-time conversation with a senior executive at Cognition. When Greenberg asked about his intentions, Degnan reportedly replied that he had already made too much money and was too lazy to go work for a competitor. Greenberg stated he believed him. However, after Degnan spent time advising the Factory team on several confidential board-level issues, he called Greenberg to clarify that the talks with Cognition were not one-time occurrences, but rather official and ongoing.
"For weeks, while sitting in our board meetings and advising the management team, he was also holding conversations with executives at our biggest competitor," Greenberg wrote. He noted that Degnan was bound by confidentiality obligations, raising serious questions about the sensitive information to which he was exposed.
Factory also alleged that engineers from Cognition participated in job interviews at Factory under false pretenses to extract product details. Wu and Cognition strongly denied these claims, asserting that the company never asked employees to gather intelligence through illicit means.
The Rise of AI Coding Agents: Droid vs. Devin
The dispute highlights the intense competition in the AI software agent market. Unlike basic AI tools that merely suggest lines of code, these agents handle complex development tasks autonomously, from writing code to debugging.
Factory, founded three years ago in San Francisco, develops Droid, an AI agent integrated into enterprise software workflows. The company recently raised $200 million at a $5 billion valuation. Meanwhile, Cognition, famous for its Devin agent, raised $2 billion at a $48 billion valuation, underscoring the massive stakes and fierce battle for talent in the booming AI sector.
