AI Startups Factory and Cognition Trade Boardroom Accusations

San Francisco-based artificial intelligence startups Factory and Cognition have entered a public dispute following the departure of Chris Degnan, a former Factory board observer and advisor who recently joined Cognition as chief revenue officer. The fallout centers on allegations of corporate espionage and breached fiduciary duties, underscoring the intensifying competition in the autonomous AI coding agent sector. Factory CEO Matan Grinberg announced Degnan termination on X after the company discovered he had been holding recurring discussions with Cognition executives while advising on confidential strategic matters. Grinberg further alleged that Cognition staff conducted covert interviews disguised as job candidates to extract proprietary information about Factory operations. Degnan and Cognition CEO Scott Wu have categorically denied these claims, with Degnan stating he resigned to take the Cognition role after declining a full-time offer from Factory, and Wu asserting that Cognition never solicited competitor intelligence through deceptive practices. The controversy unfolds against a backdrop of massive capital injection into both ventures. Earlier this month, Factory secured a $200 million funding round at a $5 billion valuation, while Cognition raised over $2 billion at a $48 billion valuation just days prior. Investor reactions quickly polarized. Khosla Ventures founder Vinod Khosla publicly backed Cognition, characterizing Factory as a struggling second-tier competitor acting out of desperation. Conversely, Khosla Ventures managing director Keith Rabois supported Factory, condemning the alleged practice of interviewing at a direct competitor while serving on its board. This high-profile clash reflects broader ethical tensions within Silicon Valley as enterprises race to deploy autonomous software engineering tools. While boardroom departures due to competitive conflicts are not unprecedented, the public nature of the accusations marks a significant escalation. The incident highlights the zero-sum dynamics currently shaping the AI coding market, where major tech firms and well-funded startups alike are vying for enterprise contracts. Both companies declined to comment further, leaving the dispute to play out in public forums and investor channels.