AI Startup Rivals Factory and Cognition Clash in Public Feud Over Espionage
A bitter public feud between AI startups Factory and Cognition has exposed Silicon Valley espionage allegations, investor infighting, and venture capital conflicts.
The fierce race for software development powered by autonomous AI agents has taken a particularly bitter turn, with two prominent startups, Factory and Cognition, clashing publicly on social media. The public feud has exposed behind-the-scenes tensions in the tech industry, friction between founders and investors, and the worsening ethical dilemmas plaguing the venture capital AI boom.
At the center of the storm is Chris Degnan, a former senior executive at Snowflake and early advisor to Factory. Matan Greenberg, co-founder and CEO of Factory, accused Degnan on X of being fired after it was discovered he held ongoing discussions with the management of their chief rival, Cognition, best known for its Devin coding agent.
Greenberg claimed that Degnan was exposed to confidential roadmap information during his tenure. "It seems ethics are thrown out the window in the AI era," Greenberg wrote, adding that while attending board meetings and advising leadership, Degnan was secretly negotiating with competitors. Greenberg further alleged that Cognition employees faked job interviews at Factory to poach internal intelligence. Degnan swiftly denied the allegations, countering that he resigned voluntarily to become Cognition's Chief Revenue Officer and never leaked secrets. Cognition CEO Scott Wu also defended his company, rejecting accusations of industrial espionage.
The drama escalated when prominent venture capitalists entered the fray. Khosla Ventures is an investor in both Factory and Cognition. Fund founder Vinod Khosla publicly attacked Greenberg, calling Factory a "second-tier lagging competitor" and accusing Greenberg of desperation. In a striking twist, fellow Khosla partner Keith Rabois publicly sided with Factory, condemning the ethical breach of interviewing with a rival while sitting on a board of directors. Meanwhile, Sequoia Capital partner Sean Maguire added fuel to the fire with a veiled threat on X, warning that investors were holding a "nuclear weapon" capable of crushing Cognition.
Beyond the corporate bickering, the high-stakes dispute highlights a systemic issue exacerbated by the current AI frenzy: severe conflicts of interest among venture capital firms. Backing competing startups and placing partners on rival boards creates a tangled web of cross-interests. This grey area has increasingly drawn regulatory scrutiny, notably following the U.S. Department of Justice investigations into similar board-level conflicts of interest at major AI investment funds.
