Matan Grinberg, co-founder and chief executive of AI coding company Factory, terminated VC advisor Chris Degnan from his board role on Wednesday, alleging that Degnan had been leaking proprietary information to Factory’s primary competitor, Cognition.
The accusation came via a post on X, where Grinberg described the breach of trust as a violation of one of Silicon Valley’s “sacred bonds.” Approximately two hours later, Degnan announced on LinkedIn and X that he had accepted a full-time position as chief revenue officer at Cognition.
Degnan previously served as Snowflake’s inaugural sales hire and spent a decade and a half as the company’s CRO. For the past five months, he has been a partner at Newport Beach-based RPT Partners, which holds a stake in Factory. His professional profile also lists him as a go-to-market advisor for the venture firm Iconiq, a role he has held since last October.
Grinberg stated that Degnan had previously admitted to having a “casual” discussion with a Cognition executive but reassured Grinberg that he had no intention of working for the rival. Degnan reportedly claimed he had “made too much money” and was “too lazy” to make the move. However, Grinberg learned on Monday that ongoing talks with Cognition had actually taken place.
This revelation prompted Grinberg to question the extent of confidential data Degnan had accessed and shared. In his public statement, Grinberg wrote that Degnan’s timely inquiries about Factory’s product roadmap and competitive gaps now appeared suspicious given his dual allegiance.
“For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor,” Grinberg said. “We do not know the extent of the information he shared, but it puts his timely questions about our product roadmap and what the parity gap involves into a new light.”
Degnan’s announcement of his new role did not mention Factory but highlighted that RPT Partners and its managing partner, Chad Peets, would be collaborating with Cognition. “I am thrilled that Chad and the RPT team will be working closely with me in our pursuit of building a generational company,” Degnan wrote.
Factory, a three-year-old San Francisco startup developing autonomous AI coding agents, recently closed a $200 million funding round at a $5 billion valuation. Its investor roster includes Blackstone, Khosla Ventures, Sequoia Capital, and Insight Partners. The company serves high-profile clients such as Nvidia, Adobe, and the Royal Bank of Canada.
Cognition, maker of the Devin coding agent, raised an additional $2 billion earlier this month, reaching a $48 billion valuation. Its customer base features Mercedes-Benz, NASA, Goldman Sachs, and Citi.
The incident highlights evolving tensions in the venture capital sector, where many firms now invest in direct AI competitors. However, legal repercussions for board-level conflicts remain a concern, evidenced by a recent Department of Justice probe into Andreessen Horowitz over its partners serving on competitor boards.
Grinberg emphasized that startup founders must be able to rely on their board members, calling Degnan’s conduct “unacceptable.” Representatives for Degnan, Peets, and Factory did not immediately return requests for comment.
This is exactly why you need ironclad NDAs for board seats. Losing $200 million worth of trust over casual coffee meetings is a costly lesson.
‘Too lazy’ to work for the rival, yet he joined hours later. Maybe Grinberg was right to be suspicious all along.
Seems pretty cut and dry if he was discussing the roadmap while sitting on the board. Did Degnan think he could keep those secrets forever?
I never thought board conflicts would become this common in AI. The A16Z DOJ probe shows regulators are definitely watching this trend closely now.
$48 billion valuation for Cognition? Ouch. That explains the intense competition and the temptation for advisors to jump ship.