Factory AI and Cognition, two prominent San Francisco-based AI startups that create coding agents, are publicly feuding over the departure of a former Factory observer and board advisor who is joining Cognition as chief revenue officer.
Factory CEO Matan Grinberg posted on X on Wednesday that the company had terminated Chris Degnan’s position after learning he had recurring conversations with Cognition executives while advising Factory on confidential matters.
The dispute highlights the high stakes of the AI coding market, where startups and big tech are racing to create autonomous software engineers to sell to corporate clients. Cognition is best known for Devin, an AI coding agent designed to automate software engineering tasks. Factory sells a product that helps companies deploy AI agents throughout the software development process.
“It’s as if ethics are thrown out the window in the age of AI,” Grinberg wrote. “For weeks, while he attended our board meetings and advised our management team, he also confided in executives at our largest competitor.” Grinberg also alleged that Cognition employees faked interviews with Factory to gain access to internal information.
Degnan, who is an advisor to several startups and was previously Snowflake’s chief revenue officer, has denied the allegations. He wrote on X that he resigned from Factory this week and told Grinberg he was joining Cognition. According to Degnan’s post, Grinberg asked him to consider a full-time position at Factory, but he declined.
“Cognition has never asked for information about Factory and I will never give it,” Degnan wrote.
Grinberg, Degnan and Cognition did not respond to requests for comment.
Cognition CEO Scott Wu also disputed Grinberg’s allegations. Wu rejected Grinberg’s claim that Cognition employees posed as candidates to gather information about Factory’s products before recruiting people with knowledge of its confidential plans.
“We would never ask our engineers or any team members to collect information about a competitor under the table,” Wu wrote on X.
The clash comes weeks after both companies announced major fundraising rounds that underscored investor enthusiasm for AI coding tools. Earlier this month, Factory announced a $200 million fundraising round at a valuation of $5 billion. Cognition raised more than $2 billion at a valuation of $48 billion just days earlier.
In an unprecedented move, Khosla Ventures founder Vinod Khosla, whose company had previously invested in Cognition and led Factory’s previous fundraising, wrote on X that Factory was a “struggling second-tier competitor” acting out of desperation.
Keith Rabois, managing director of Khosla Ventures, took the opposite view. “It is inherently unethical to interview a competitor while attending board meetings and dinners,” he wrote on X.
Competition conflicts have led to the departures of high-ranking executives in Silicon Valley before, but rarely with such public accusations. Former Google CEO Eric Schmidt resigned from Apple’s board in 2009 as the companies became more direct competitors. LinkedIn co-founder Reid Hoffman resigned from OpenAI’s board of directors in 2023, citing potential conflicts involving his investments and AI startup activities.
Henry Chandonnet contributed reporting.
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