Menlo Ventures has invested in Factory, the AI coding startup at the center of a public dispute with rival Cognition and investor Vinod Khosla last week, TechCrunch reported Monday. Menlo partner Matt Murphy and his team announced the investment in a blog post, saying it was part of the round Factory disclosed last month at a $5 billion valuation.

What Happened

Menlo did not say how much it invested. A source told TechCrunch the check was significant for the firm and that Menlo would have put in more if there had been room on Factory's capitalization table.

The timing drew attention because of what happened the week before. As The Primary Wire reported Sept. 30, Factory CEO Matan Grinberg said he had dismissed Chris Degnan of RPT Partners as an adviser to Factory's board, saying he feared Degnan had shared confidential information with Cognition. Degnan had just become Cognition's chief revenue officer. Degnan rejected that account, saying he resigned and had turned down a competing job offer from Grinberg.

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Khosla, whose firm has invested in both Factory and Cognition, then publicly called Factory a struggling second-tier competitor and accused Grinberg of lying. Shaun Maguire of Sequoia, another Factory investor, publicly welcomed Menlo's announcement on X.

Why It Matters

Factory and Cognition both build AI agents for software development, a category that has drawn some of the largest venture rounds of the current cycle. When a prominent investor in both companies publicly disparages one of them, it can affect how customers, recruits and future investors view that startup. A new backer stepping in at the same valuation a week later is a direct counterpoint.

Menlo's position also differs from Khosla's in one important way: it is not an investor in Cognition. Much of last week's argument turned on overlapping relationships, including an adviser moving between direct competitors and a venture firm holding stakes on both sides. Menlo's backing comes without that overlap.

Murphy's track record adds weight to the endorsement. He is known for leading Menlo's early bet on Anthropic, when the company was widely seen as an underdog to OpenAI, and he has since backed companies including Lovable and Legora. TechCrunch noted that some observers have started describing Factory as the next Anthropic.

What to Watch

The underlying dispute is unresolved. Grinberg and Degnan still give conflicting accounts of whether Degnan resigned or was fired and of what, if anything, he shared with Cognition. Neither side has announced legal action, and any escalation, such as Factory releasing the communications it says support its version, would reopen the fight.

The other thing to watch is Factory's next raise. The source's remark that Menlo wanted a bigger allocation may indicate demand for Factory shares beyond what the company sold at $5 billion, which could set up a higher valuation the next time it raises money.