Benchmark has built its reputation on 10-to-15-year partnerships with founders, starting at the earliest stage. Now its partners say AI is making one part of that relationship harder to guarantee: keeping rival companies out of the same investment portfolio.
Speaking at TechCrunch Disrupt earlier this week, the partners acknowledged that the decades-old, unwritten rule against backing two direct competitors can no longer be counted on. Asked whether that pact still holds as portfolio companies expand into each other’s territory, they described conflicts as increasingly unavoidable, not something they prefer.
For Chetan Puttagunta, the distinction is between backing a direct competitor from the start and watching two initially separate businesses grow into rivals. He called the first situation “an easy answer.” The second is harder to prevent. “That happens,” he said.
AI is accelerating that collision, Puttagunta argued. As the cost of building software “effectively goes to zero,” founders remain “incredibly ambitious.” They see a “surface area” of opportunity and want to pursue all of it, making it more likely that their companies will run into one another.
Eric Vishria described the same problem through the speed at which companies change direction. “The harsh reality of this world is every company is evolving very quickly,” he said. Businesses pivot, expand and change, meaning “you are going to get conflicts, and that’s just the reality of the current dynamic.”
The old boundary has already been under pressure for some time. OpenAI and Anthropic share dozens of investors. A more personal dispute between AI coding rivals Factory and Cognition illustrates how contentious overlapping relationships can become.
At the end of September, Factory, a startup building an AI agent to write software, said it was firing board observer and adviser Chris Degnan for “unethical conduct involving Cognition,” its direct competitor and the maker of the Devin coding agent. Factory’s CEO alleged that Degnan had discussed a job at Cognition while he had access to Factory’s board-level discussions.
Degnan said he had already resigned and denied sharing anything confidential. Soon afterward, he announced he was joining Cognition as chief revenue officer.
Vinod Khosla publicly sided with Degnan on X, criticizing Factory’s CEO and calling the startup “a struggling second tier competitor.” Khosla Ventures backs both Factory and Cognition.
Seemingly referring to that dispute, Vishria said Benchmark had been fortunate not to end up in “that type of insane direct conflict.” He said the firm remains committed to each founder and keeps what it learns confidential. He also downplayed how much useful information a venture capitalist could pass along: “We are not product or technology experts.”
That doesn’t mean Benchmark is abandoning exclusivity. Vishria said it remains “really important” at the very early stage the firm favors. His qualification was explicit: “But things are evolving. There’s no doubt about that.”
Peter Fenton called conflicts “kryptonite” and Benchmark’s toughest problem. His explanation centered on how closely an investor works with a company. At one end of the spectrum is a co-founder, who would never work on a competing business. At the other is a public-market stock picker, who can own several rivals because the role is to allocate capital, not help shape those companies.
Benchmark sits closer to the co-founder end, Fenton said. That makes transparency a golden rule: “There shouldn’t be the surprise after the fact.” If a conflict does arise, he added, a founder should never feel shortchanged.
Benchmark isn’t declaring the pact against backing rivals dead. But its position leaves founders with a concrete question: if even a firm known for long-term loyalty expects conflicts, which other investors will be equally candid before those conflicts arrive?
