Menlo Ventures Invests in AI Coding Startup Factory Following Khosla Clash.
Menlo Ventures has announced a significant investment in AI coding startup Factory, marking a decisive vote of confidence in the company amid recent public controversy. The commitment, made by partner Matt Murphy and his team, is part of Factory’s latest funding round, which values the company at $5 billion. While the firm declined to disclose the exact amount, insiders confirm the stake was substantial and that Menlo would have increased its position had capacity allowed. Notably, Menlo Ventures holds no investment in Factory’s primary competitor, Cognition. The investment arrives shortly after a highly publicized dispute involving Factory’s co-founder and CEO, Matan Grinberg, and former board advisor Chris Degnan. Grinberg recently alleged that he removed Degnan from his advisory role due to concerns that confidential information might have been shared with Cognition following Degnan’s move to the rival firm as chief revenue officer. Degnan disputed the claims, stating he resigned and declined a competing offer from Grinberg. The conflict quickly drew attention from prominent venture capitalists, most notably Vinod Khosla, who criticized Factory as a struggling second-tier competitor and accused Grinberg of damaging his reputation. Menlo Ventures’ endorsement directly counters such skepticism. In a public blog post, the firm praised Factory’s technology, leadership, and customer relationships, signaling that the company remains on a strong trajectory. Murphy, known for his early backing of Anthropic and subsequent successes with Lovable and Legora, has drawn comparisons among investors that position Factory as a potential industry leader. Sequoia Capital partner Shaun Maguire, another Factory backer, praised the firm’s momentum, noting that Menlo is currently securing high-impact deals across the sector. The investment reinforces Factory’s standing in the competitive AI landscape and underscores sustained institutional support despite recent media friction.
