Menlo Ventures backs Factory amid high-profile industry feud

Menlo Ventures has joined the cap table of AI coding startup Factory, signaling a calculated vote of confidence just days after the company found itself at the center of a vitriolic public dispute between its CEO and prominent investor Vinod Khosla.

Business Faces·October 5, 2026·reads: 2,992

Menlo partner Matt Murphy confirmed the investment Monday, opting not to disclose the specific dollar amount while noting the deal aligns with Factory’s recent $5 billion valuation. According to sources close to the transaction, Menlo viewed the stake as a high-priority addition, expressing a desire to commit even more capital had the cap table permitted further expansion.

The move serves as a strategic counter-narrative to the fallout from Factory CEO Matan Grinberg’s recent allegations against board advisor Chris Degnan. Grinberg claimed he terminated Degnan over concerns regarding potential leaks to rival firm Cognition. The situation escalated when Khosla, who holds stakes in both companies, publicly disparaged Factory as a "struggling second-tier competitor" and accused Grinberg of dishonesty.

By backing the startup, Menlo is positioning itself against the prevailing skepticism from industry veterans like Khosla. Murphy, whose reputation for identifying early winners—most notably Anthropic—remains a major draw, is framing the investment as a validation of Factory’s technology and customer relationships. Sequoia’s Shaun Maguire, another early supporter of Grinberg, publicly championed Menlo’s involvement, further sharpening the divide between those betting on Factory’s trajectory and those siding with the established VC guard.