Factory CEO Fires VC Board Advisor Accused of Spying for Rival Cognition

Factory Fires Board Advisor Over Alleged Information Sharing

Matan Grinberg, co-founder and CEO of AI startup Factory, publicly fired VC board advisor Chris Degnan on Wednesday, accusing him of sharing confidential information with the company's biggest competitor, Cognition1

1

. Two hours after the termination, Degnan announced on X and LinkedIn that he had joined Cognition as its chief revenue officer1

1

. The conflict-of-interest scandal has sparked debate about ethical boundaries in the competitive AI startup landscape, particularly as the agentic coding space heats up.

Degnan had served as a partner with RPT Partners, a Newport Beach, California-based investor in Factory, for the past five months1

1

. His LinkedIn profile also listed him as a go-to-market advisor for venture firm Iconiq since October of last year1

1

. Before his VC roles, Degnan spent 11 years as Snowflake's chief revenue officer after being the data company's first sales hire1

1

.

Timeline of Events Raises Questions

According to Grinberg's public statement, Degnan initially admitted to having a "casual" conversation with a Cognition executive but assured the Factory CEO he had no interest in working for the rival AI coding company1

1

. Degnan reportedly told Grinberg he had "made too much money" and was "too lazy to go work for Cognition," which Grinberg said he "trusted and believed"1

1

. However, on Monday, Degnan disclosed that he had actually been in ongoing talks with Cognition1

1

.

Grinberg expressed concern about the extent of confidential information Degnan possessed and potentially shared with his new employer1

1

. "For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor," Grinberg wrote, adding that Degnan's "timely questions about our product roadmap and what the parity gap involves" now appeared in a different light1

1

.

Degnan has disputed the allegations, claiming he resigned from his adviser role after informing Grinberg about joining Cognition3

3

. Cognition CEO Scott Wu also stated that Grinberg's account was inaccurate2

2

.

High-Stakes Competition in AI Coding Space

The incident comes as both Factory and Cognition compete aggressively in the AI coding startup market. Three-year-old Factory, based in San Francisco, builds agentic coding tools whose AI agents can carry out programming tasks largely on their own1

1

. The AI coding company raised $200 million at a $5 billion valuation this month from Blackstone, Khosla Ventures, Sequoia Capital, Insight Partners, and others1

1

. Factory counts Nvidia, Blackstone, Royal Bank of Canada, Palo Alto Networks, Adobe, and T-Mobile as customers1

1

.

Cognition, maker of the Devin coding agent, raised $2 billion at a $48 billion valuation earlier this month1

1

. The company serves Mercedes-Benz, NASA, Goldman Sachs, and Citi1

1

.

Broader Implications for Silicon Valley Startup Ecosystem

Grinberg's public callout highlights growing ethical concerns about board-level conflicts in the Silicon Valley startup ecosystem. "It feels as though ethics is being thrown out of the window in the AI era. People are willing to do anything, including exploiting privileged information and violating ethical boundaries," Grinberg wrote2

2

. He emphasized that "trust was violated" and that "trust in Board Membership is one of the sacred bonds in the Silicon Valley, one that helps the startup ecosystem thrive"1

1

.

Notably, Degnan's announcement about joining Cognition mentioned that RPT Ventures and managing partner Chad Peets would now work closely with Cognition1

1

. This raises questions about potential conflicts of interest, particularly as VC firms increasingly invest in direct AI competitors. VC giant Andreessen Horowitz is reportedly under Justice Department investigation for partners serving on competitors' boards1

1

.

Watch for potential legal action from Factory regarding breach of confidentiality obligations, increased scrutiny of VC board relationships in the AI sector, and whether this incident prompts stronger governance frameworks around board advisor roles in the competitive AI startup landscape.