Menlo Ventures has invested in AI coding startup Factory, joining the company's latest funding round at a $5 billion valuation. Announced by Menlo partner Matt Murphy on October 5, 2026, the backing comes immediately after a high-profile public disagreement between Factory leadership and prominent silicon valley investors.
Public Fallout Precedes New Capital
The investment follows public friction between Factory co-founder and chief executive Matan Grinberg and venture investor Vinod Khosla. Grinberg alleged he dismissed board advisor Chris Degnan over concerns regarding potential leaks of confidential data to rival software assistant developer Cognition, where Degnan subsequently joined as chief revenue officer. Degnan and Khosla disputed the claims, with Khosla publicly characterizing Factory as a struggling competitor. Meanwhile, Sequoia partner Shaun Maguire publicly defended Grinberg during the exchange.
Menlo Takes Stand in Competitive Sector
Menlo's endorsement signals strong confidence in Factory's software and market traction despite the boardroom controversy. The venture firm, led on this deal by Murphy, does not hold equity in rival Cognition. Although Menlo declined to specify the exact financial figure of its contribution, sources familiar with the arrangement noted that the investment represents a significant allocation for the firm.
Rivalries Escalate Over Developer Tools
The move highlights mounting competition among venture firms seeking top positions in the market for automated coding and AI developer tooling. As valuation figures rise across generative software companies, overlapping portfolio investments continue to trigger friction among major capital providers and rival software startups.
AI-generated editorial illustration; not a documentary photograph.
Source: After Factory’s public spat with Khosla, Menlo proudly invests
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