Menlo Ventures partner Matt Murphy and his team announced on a blog post Monday that the firm has invested in the AI programming startup Factory.
Menlo declined to disclose the specific investment amount, but stated that this transaction is part of Factory’s most recent funding round announced last month, when the company was valued at $5 billion. A source familiar with the deal told TechCrunch that this was a significant investment for Menlo, not merely symbolic; had there been additional space on Factory’s cap table, Menlo would have been willing to invest even more.
Typically, such messages wouldn’t make headlines; startups frequently extend their fundraising rounds beyond previous ones to bring in new investors. But last week, Matan Grinberg, co-founder and CEO of Factory, became embroiled in a very public family dispute. He claimed to have removed investor Chris Degnan from his advisory role at RPT Partners, asserting that he feared Degnan might have shared confidential information with Factory’s largest competitor, Cognition. This allegation came after Degnan joined Cognition as its Chief Revenue Officer.
Following this, numerous prominent figures in the tech industry publicly voiced their opinions, with some supporting Degnan and condemning Factory, while others sided with Factory. Yet the most surprising stance came from Vinod Khosla. Khosla’s firm has invested in both Factory and Cognition. Nevertheless, the seasoned venture capitalist labeled Factory a “struggling second-tier competitor,” accused Grinberg of lying about firing Degnan, and disparaged his character. Degnan also disputed Grinberg’s account, stating that he resigned voluntarily and had previously turned down another job offer from Grinberg.
Therefore, Menlo’s high-profile endorsement of Factory—praising its founding team, technology, and relationships with clients—is more than just a bonus for Factory; it is also a statement that Factory is not in the state Khosla implied.
Murphy is known for early bets on Anthropic, when Anthropic was still seen as a follower behind OpenAI. Since then, he has continued to score hits, such as investing in Lovable and Legora. As a result, some venture capitalists now refer to Factory as “the next Anthropic.”
Shawn Maguire of Sequoia Capital is also one of Factory’s supporters, having publicly backed Grinberg on X last week. He appears equally energized by Menlo’s endorsement, calling Menlo “gaining momentum.” Notably, Menlo is not an investor in Cognition, its competitor.