Factory CEO fires board advisor over alleged intelligence sharing with rival Cognition

On Wednesday, Matan Grinberg, co-founder and CEO of AI coding startup Factory, took to X to announce he had terminated VC Chris Degnan from his position as a board advisor. Grinberg's allegation: Degnan had disclosed sensitive company details to Cognition, Factory's primary market rival.

Within two hours of that announcement, Degnan posted his own news across X and LinkedIn—he was joining Cognition as chief revenue officer.

Degnan's background includes serving as Snowflake's inaugural sales hire and spending 11 years leading the data platform's revenue operations as chief revenue officer. Most recently, he had spent five months as a partner at RPT Partners, a Newport Beach, California-based investor backing Factory. His LinkedIn profile also lists him as a go-to-market advisor for the larger venture capital firm Iconiq, a position he has held since October of last year.

Factory, based in San Francisco and founded three years ago, develops agentic coding systems where AI agents independently execute programming work. The startup secured $200 million in fresh funding this month at a $5 billion valuation from investors including Blackstone, Khosla Ventures, Sequoia Capital, and Insight Partners. Its client roster spans Nvidia, Blackstone, Royal Bank of Canada, Palo Alto Networks, Adobe, and T-Mobile.

Cognition, which built the Devin coding agent, represents Factory's most formidable competitor in Grinberg's view. The rival raised $2 billion earlier this month, achieving a $48 billion valuation, and counts Mercedes-Benz, NASA, Goldman Sachs, and Citi among its customers.

According to Grinberg's account on X, Degnan had previously disclosed having a "casual" conversation with a Cognition executive but assured Grinberg he harbored no intention of joining the competitor. Degnan reportedly told Grinberg he had "made too much money" and was "too lazy to go work for Cognition"—statements Grinberg said he "trusted and believed." On Monday, however, Degnan revealed he had actually been engaged in substantive discussions with Cognition.

This revelation prompted Grinberg to reassess what proprietary information Degnan possessed and potentially had transmitted—or might transmit—to his incoming employer. Grinberg terminated Degnan's board seat on Tuesday, explaining his reasoning in a post:

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.

Matan Grinberg

Degnan's announcement of his Cognition appointment omits any reference to Factory. Notably, it does highlight that RPT Ventures and its managing partner Chad Peets will collaborate with Cognition going forward. "I am thrilled that Chad and the RPT team will be working closely with me in our pursuit of building a generational company," Degnan wrote.

Historically, venture capital firms exercised considerable caution around conflicts of interest at the board level. The modern AI landscape has shifted this dynamic considerably—many venture investors now hold stakes in direct competitors such as OpenAI and Anthropic.

Board-level conflicts of interest can still carry real repercussions, however. Andreessen Horowitz, one of the industry's largest venture firms, is reportedly under investigation by the Justice Department regarding its partners' roles on competitor boards.

Grinberg emphasized the foundational importance of trust between founders and board members. "Chris's conduct is unacceptable to me. Trust in Board Membership is one of the sacred bonds in the Silicon Valley, one that helps the startup ecosystem thrive. With it comes an enormous responsibility. That trust was violated."

As of publication, Degnan, Peets, and Factory had not provided additional comment.