Matt Murphy, a partner at Menlo Ventures, along with his colleagues, revealed on Monday via a blog post that Menlo has taken a stake in the AI programming startup Factory. Menlo declined to disclose the investment amount, noting that the financing is part of Factory’s most recent round, which was revealed last month at a $5 billion valuation.
A source close to the transaction said the investment was substantial for Menlo — not a minor gesture — and that the firm would have contributed additional capital if space had existed on the cap table. Normally, such an update wouldn’t be noteworthy; startups frequently add new investors to existing rounds.
However, last week Factory co‑founder and CEO Matan Grinberg became the center of a highly visible dispute when he claimed he had dismissed board advisor Chris Degnan of RPT Partners. Grinberg expressed concern that Degnan might have leaked confidential data to Factory’s primary rival, Cognition.
This allegation came after Degnan joined Cognition as its chief revenue officer. A roster of prominent tech figures emerged, some backing Degnan and criticizing Factory, while others did the opposite; the most unexpected voice was that of Vinod Khosla.
Although Khosla’s firm holds stakes in both Factory and Cognition, the seasoned venture capitalist still labeled Factory a desperate, struggling second‑tier competitor and accused Grinberg of fabricating the story about firing Degnan while assailing his character. Degnan contested Grinberg’s account, stating that he had stepped down voluntarily and had turned down a competing job offer from Grinberg.
Consequently, Menlo’s emphatic endorsement of Factory — commending its founders, technology, and customer relationships — goes beyond a mere accolade; it signals that Factory is far from the precarious position Khosla suggested. Murphy is known for betting on Anthropic early, when it seemed a secondary player to OpenAI, and has since secured a series of successful deals, including with Lovable and Legora.
As a result, some venture capitalists are now referring to Factory as the “next Anthropic.” Sequoia partner Shaun Maguire, another Factory investor who publicly defended Grinberg on X last week, expressed enthusiasm for Menlo’s support, noting that the firm is “on a roll.” Importantly, Menlo does not hold a stake in rival Cognition.