Menlo Ventures partner Matt Murphy and his team announced Monday in ablog postthat the firm has invested in AI coding startup Factory.
Menlo declined to comment on how much it invested but said the deal was part of Factory’s latest funding roundannounced last month at a $5 billion valuation.A source familiar with the deal told us the investment was significant to Menlo — not a token gesture — and that Menlo would have invested more had there been room on the cap table.
Ordinarily, something like this wouldn’t necessarily be news; startups often extend previous rounds to add new investors. But last week, Factory co-founder and CEO Matan Grinberg wasembroiled in a very public airing of dirty laundry when he allegedthat he had fired investor Chris Degnan of firm RPT Partners from his role as board advisor. Grinberg said he feared Degnan may have shared confidential information with Factory’s biggest competitor, Cognition. The accusation followed Degnan’s move to Cognition as its chief revenue officer.
A who’s who of the tech industry came out of the woodwork either to either support Degnan and condemn Factory, or vice versa, but none was more surprising than Vinod Khosla. Khosla’s firm is an investor in both Factory and Cognition. But that didn’t stop the venerable VC from calling Factory a desperate “struggling second tier competitor,” and accusing Grinberg of lying about firing Degnan and impugning his character. Degnan disputed Grinberg’s story, saying he resigned and that he’d rebuffed a competing job offer from Grinberg.
So Menlo’s full-throated endorsement of Factory, which praised its founders, its tech, and its relationship with its customers, is more than a feather in Factory’s cap. It’s a statement that Factory is not in the state that Khosla implied it was.
Murphy famouslybet his firm on Anthropicback when it appeared to be an also-ran to OpenAI and has been on a hot streak ever since, landing deals with Lovable and Legora, for instance. So now someVCs are calling Factory “the next Anthropic.“
Sequoia’s Shaun Maguire, also a Factory backer who came out on X in support of Grinberg last week,appears thrilledwith Menlo’s endorsement, saying the firm is “on a tear.” Notably, Menlo is not an investor in competitor Cognition.
