Menlo Ventures has invested in AI coding startup Factory, according to a blog post by partner Matt Murphy. The firm declined to say how much it invested, but a source familiar with the deal said it was significant and that Menlo would have invested more had there been room on the cap table. The investment is part of Factory's latest funding round, announced last month at a $5 billion valuation.
The move comes just days after Factory co-founder and CEO Matan Grinberg publicly accused former board advisor Chris Degnan of possibly sharing confidential information with competitor Cognition. Degnan disputed the account, saying he resigned. Vinod Khosla, whose firm invests in both Factory and Cognition, called Factory a desperate "struggling second tier competitor" and accused Grinberg of lying.
Menlo's endorsement is notable because it directly counters Khosla's characterization. Murphy previously bet on Anthropic when it seemed to trail OpenAI, and his firm has since landed deals with Lovable and Legora. Some VCs are now calling Factory "the next Anthropic," and Sequoia's Shaun Maguire, a Factory backer, welcomed Menlo's support. Menlo is not an investor in Cognition, which may make its backing of Factory a clearer signal of conviction. The source did not indicate any disagreement between Menlo and Khosla's assessment beyond the{