After Factory’s public spat with Khosla, Menlo proudly invests

Menlo Ventures, led publicly by partner Matt Murphy, announced in a blog post that it has invested in AI coding startup Factory as part of the company’s latest funding round, which values Factory at $5 billion. Menlo would not disclose the size of its investment; a person familiar with the deal told the outlet the check was material for Menlo and that the firm would have put in additional capital if the cap table had allowed it.

The investment comes days after a heated public dispute involving Factory co‑founder and CEO Matan Grinberg and former board advisor Chris Degnan, who had left RPT Partners to join competitor Cognition. Grinberg said he fired Degnan amid concerns Degnan might have shared confidential information with Cognition; Degnan has said he resigned and rejected a competing job offer from Grinberg. The episode drew wide attention from tech leaders and investors.

Vinod Khosla, whose firm has investments in both Factory and Cognition, criticized Factory during the exchange, calling it a "struggling second tier competitor" and accusing Grinberg of lying about the circumstances of Degnan’s departure. In contrast, Menlo’s post lauded Factory’s founders, technology, and customer relationships — a public affirmation that counters the characterization Khosla offered.

Menlo partner Matt Murphy is known for backing Anthropic when it was seen as trailing OpenAI, and that track record — plus Menlo’s newly disclosed investment — has prompted some observers to liken Factory to prior underdog winners. Sequoia investor Shaun Maguire, another Factory backer who publicly supported Grinberg last week, responded positively to Menlo’s move, saying the firm is "on a tear." Menlo is not an investor in Cognition, the competitor at the center of the dispute.