Menlo Ventures Backs AI Startup Factory Following Public Clash With Vinod Khosla

Menlo Ventures has invested in artificial intelligence coding startup Factory, participating in the company's latest financing round after a week of public tension between Factory leadership and investor Vinod Khosla, according to a report by TechCrunch Venture (https://techcrunch.com/2026/10/05/after-factorys-public-spat-with-khosla-menlo-proudly-invests/).

Menlo partner Matt Murphy and his team announced the backing in a blog post on Monday. While Menlo did not disclose the precise capital figure, the firm confirmed the investment forms part of Factory's round announced last month at a $5 billion valuation. A source familiar with the transaction told TechCrunch Venture that the check represented a significant commitment for Menlo and that the firm would have deployed more capital if additional room remained on the capitalization table.

The investment closely follows a dispute between Factory co-founder and Chief Executive Officer Matan Grinberg and former board advisor Chris Degnan. Last week, Grinberg stated publicly that he fired Degnan, an investor at RPT Partners, due to concerns that confidential business information could leak to rival coding startup Cognition, where Degnan recently joined as chief revenue officer.

Degnan disputed Grinberg's account, stating that he resigned voluntarily from the advisory role and had turned down a competing employment offer from Grinberg. The disagreement escalated when Vinod Khosla—whose firm holds stakes in both Factory and Cognition—publicly called Factory a desperate "struggling second tier competitor" and accused Grinberg of misrepresenting Degnan's departure and attacking his character.

Menlo's investment post served as a direct counterweight to Khosla's critique, praising Factory's founders, technical platform, and customer relationships. Unlike Khosla's firm, Menlo does not hold an investment in Cognition.

The deal adds to a series of high-profile AI bets by Murphy, who previously led Menlo's early investment in Anthropic and recently backed startups including Lovable and Legora. Existing Factory backer Shaun Maguire of Sequoia Capital also endorsed Menlo's entry on social platform X, remarking that the firm is "on a tear."