Menlo Ventures Confirms Significant Investment in AI Coding Startup Factory Amidst Industry Feud

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Menlo Ventures has made a notable investment in AI coding startup Factory, publicly supporting the company after a high-profile dispute involving another investor, Vinod Khosla.

In a striking move following a public dispute involving Factory and prominent investor Vinod Khosla, Menlo Ventures has confirmed a significant investment in the AI coding startup Factory. Menlo Ventures partner Matt Murphy and his team announced on October 5, 2026, via a blog post, an investment as part of Factory’s recent funding round, which values the company at $5 billion. While Menlo declined to disclose the exact amount, sources indicate the investment is substantial and not a mere symbolic gesture, with Menlo noting that it would have invested further if space on the capitalization table had been available.

The announcement follows a contentious episode where Factory’s co-founder and CEO Matan Grinberg publicly revealed he had dismissed investor Chris Degnan of RPT Partners from an advisory role due to concerns that Degnan might have leaked confidential information to Cognition, Factory’s major competitor. Degnan later joined Cognition as chief revenue officer. This revelation triggered a fierce debate within the tech community, with investors and industry figures taking sides on the matter.

Of particular note was Vinod Khosla, whose venture firm invests in both Factory and Cognition. He harshly criticized Factory, labeling it a "struggling second tier competitor" and disputing Grinberg’s claims, suggesting that Degnan resigned voluntarily and had declined a competing offer from Grinberg. Degnan himself contradicted the CEO’s account.

Menlo Ventures’ unequivocal endorsement of Factory—praising its leadership, technology, and customer relationships—contrasts sharply with Khosla’s disparagement. This move serves as validation that Factory is in a more robust position than Khosla implied. Matt Murphy has a track record of backing emerging AI leaders, exemplified by early investments in Anthropic, Lovable, and Legora. This has led some venture capitalists to dub Factory "the next Anthropic."

Sequoia Capital’s Shaun Maguire, also an investor in Factory and an outspoken supporter of Grinberg during the recent dispute, welcomed Menlo’s backing with enthusiasm. Importantly, Menlo Ventures is not involved with Cognition, underlining the competitive alignment behind this investment.

This development highlights the complex dynamics within the AI startup ecosystem, where competitive tensions and investor alliances can unfold publicly. Menlo Ventures’ significant support solidifies Factory’s position in the AI coding market and may influence future perceptions and funding flows amid ongoing rivalry.