Matan Grinberg, co-founder and CEO of AI coding startup Factory, recently made headlines by firing VC Chris Degnan from his position as a board advisor. This dramatic fallout follows allegations that Degnan shared confidential information with Factory’s biggest competitor, Cognition. The situation has raised concerns about trust and confidentiality within board dynamics, especially in the rapidly evolving world of AI startups.
Just two hours after Grinberg’s announcement, Degnan took to X and LinkedIn to announce that he had accepted a role as Cognition’s chief revenue officer. Before his brief time with Factory, Degnan was known as Snowflake’s first sales hire and had a long tenure as the company’s chief revenue officer. He also spent the last five months as a partner at RPT Partners, which invests in Factory, and has been recognized as a go-to-market advisor for the venture firm Iconiq since October 2025.
Based in San Francisco, Factory has made impressive strides in the AI coding sector. The company recently raised $200 million, bringing its valuation to $5 billion, with significant investors like Blackstone, Khosla Ventures, and Sequoia Capital. Its clientele includes major organizations such as Nvidia, Adobe, and T-Mobile.
Grinberg noted that Cognition, which develops the Devin coding agent, poses a considerable threat to Factory’s market position. Cognition recently secured an impressive $2 billion in funding, boosting its valuation to $48 billion. Its client roster features prominent names like Mercedes-Benz, NASA, and Goldman Sachs.
Grinberg stated that Degnan had previously assured him of his disinterest in working for Cognition, despite acknowledging a “casual” conversation with a Cognition executive. Degnan claimed he had “made too much money” and was “too lazy to go work for Cognition.” However, shortly before leaving Factory, he revealed ongoing discussions with Cognition. This shift in narrative led Grinberg to question how much sensitive information Degnan might have shared during his tenure at Factory.
In his firing announcement, Grinberg emphasized the seriousness of the situation, saying, “For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor. Chris was subject to confidentiality obligations in connection with his work with Factory. We do not know the extent of the information he shared, but it puts his timely questions about our product roadmap and what the parity gap involves into a new light.”
Interestingly, Degnan’s announcement about joining Cognition did not mention Factory. Instead, he highlighted his collaboration with RPT Ventures and its managing partner, Chad Peets, in his new role. “I am thrilled that Chad and the RPT team will be working closely with me in our pursuit of building a generational company,” he wrote.
The situation becomes even more complex when considering the changing landscape of venture capital in the AI sector. Traditionally, VC firms have been cautious about conflicts of interest, but the current environment shows many investing in competing AI firms. This trend has raised eyebrows and led to scrutiny, as evidenced by the Justice Department’s investigation into Andreessen Horowitz regarding board-level conflicts.
Grinberg underscored the importance of trust among startup founders and their board members. He stated, “Chris’s conduct is unacceptable to me. Trust in Board Membership is one of the sacred bonds in Silicon Valley, one that helps the startup ecosystem thrive. With it comes an enormous responsibility. That trust was violated.”
As of now, neither Degnan nor Factory has provided additional comments regarding this unfolding drama. The implications of this incident could resonate beyond these two companies, serving as a cautionary tale for startups navigating the intricate relationships between investors and competitors.
