Topline
Billionaire venture capitalist Vinod Khosla has put himself in the middle of a public brawl between two Silicon Valley artificial intelligence companies—both of which he’s invested in—and called one a “struggling second tier competitor” with a liar for a CEO.
Vinod Khosla speaks at the 2024 Forbes Iconoclast Summit in New York City.
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Key Facts
Factory.ai, a startup that trains autonomous AI agents to develop software, on Wednesday said it had fired board advisor Chris Degnan and accused him of spying on behalf of rival company Cognition.
Factory CEO Matan Grinberg accused Cognition engineers of faking job interviews to obtain sensitive information and by leveraging insiders, namely Degnan, who he asserts was secretly advising Cognition executives while attending Factory’s board meetings.
Degnan, who this week announced he’d join Cognition as its Chief Revenue Officer, has flatly denied that he was fired and said “Cognition has never asked about information on Factory, nor would I ever give it.”
Khosla then took to X to attack Grinberg, accusing him of lying outright about Degnan’s departure and calling Factory.ai a “struggling second tier competitor.”
Khosla Ventures, Khosla’s venture capital firm, has been a huge supporter of Factory this year, leading its $150 million Series C funding round in April and joining Blackstone, Sequoia Capital and Insight Partners as key investors in a $200 million funding round weeks ago.
Khosla Ventures was also an early investor in Cognition’s early funding rounds.
CRUCIAL QUOTE
“You are a struggling second tier competitor that is more unethical and lying just because you have no decency or sense of proper behavior and shows your desperation,” Khosla said of Grinberg. “Straight out lying about if Chris being fired I thought would be below even you.”
Key background
The conflict underscores how high the competitive stakes have become in AI coding. Grinberg claims Cognition, maker of the Devin coding agent, sent engineers to conduct fake job interviews at Factory to “pry information about our product.” He said the company then “decided to throw their weight and money at people with direct knowledge of our most confidential plans,” and said Degnan “for weeks” was “confiding with executives of our largest competitor.” Grinberg wrote that “trust in Board Membership is one of the sacred bonds in the Silicon Valley” and that it “was violated.”
TANGENT
Cognition was founded in late 2023 and launched its flagship product, Devin, in 2024, touting it as the world’s first “autonomous AI software engineer.” Backed early on by Founders Fund, Khosla Ventures and other Silicon Valley figures, Cognition became an instant viral sensation and had a $48 billion valuation as of September’s funding round. Factory was founded the same year and operates a team of specialized, autonomous AI agents called Droids that integrate across all stages of software development. Factory reached a valuation of $5 billion in its latest funding round, which also took place last month. Both companies are trying to capture what is widely viewed as the “holy grail” of developer tools—fully autonomous software development—and they’re in a direct rivalry for talent and market positioning.
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