A public, fast-moving dispute erupted in Silicon Valley’s AI coding sector on September 30, after Factory AI’s CEO accused a longtime board advisor of secretly feeding confidential information to the startup’s biggest rival — and the advisor turned around and took a top job at that very rival within hours.

How it unfolded

Matan Grinberg, co-founder and CEO of agentic coding startup Factory, posted on X that he had terminated Chris Degnan’s roles as a board observer and advisor, after more than a year of Degnan serving in that capacity. According to Grinberg’s account, Degnan had earlier told him he’d had only a “casual” conversation with an executive at Cognition — the much larger rival behind the AI coding agent Devin — and had assured Grinberg he had no interest in joining the company. Grinberg says Degnan went so far as to claim he’d “made too much money” and was “too lazy” to work at Cognition, a claim Grinberg says he believed.

That changed, Grinberg says, on Monday — when Degnan, after spending that same day advising Factory’s team on confidential board-level matters, told him he had actually been in ongoing talks with Cognition all along. Grinberg terminated him the following day. In his public statement, Grinberg wrote: “Chris was subject to confidentiality obligations in connection with his work with Factory. 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.” He added more broadly: “Trust in Board Membership is one of the sacred bonds in the Silicon Valley… That trust was violated.”

Roughly two hours after Grinberg’s post, Degnan announced on both X and LinkedIn that he was joining Cognition as its Chief Revenue Officer. His announcement made no mention of Factory, but did note that Chad Peets, managing partner at Degnan’s venture firm RPT Partners, would now also be working closely with Cognition.

Degnan pushes back

Degnan disputed Grinberg’s version of events directly on X, writing simply: “I resigned from my advisor position on Monday and told you I was going to Cognition.” According to multiple outlets tracking the exchange, Degnan further claimed his last Factory board meeting took place weeks before he had ever spoken to Cognition, and that when he told Grinberg he was taking the Cognition job, Grinberg had actually offered him a full-time position at Factory instead — an offer he says he declined.

Investors take sides publicly

What makes this dispute unusually public, even by Silicon Valley standards, is that prominent venture capitalists weighed in directly rather than staying out of it. Khosla Ventures co-founder Vinod Khosla — whose firm has invested in both Factory and Cognition — publicly accused Grinberg of lying, posting on X: “Straight out lying about if Chris being fired I thought would be below even you.” Khosla separately described Factory as a “struggling second tier competitor,” according to reporting that tracked the exchange. Khosla Ventures partner Keith Rabois took the opposite position, calling Degnan’s alleged conduct “unethical per se.”

Cognition CEO Scott Wu also addressed the controversy publicly, writing that his company has “no interest in Factory’s info and Chris has never brought it up” — a statement that pushed back on the spying allegation without directly disputing that Degnan had been in talks with Cognition before his resignation.

The companies involved

Factory, a three-year-old San Francisco startup whose AI agents carry out programming tasks largely autonomously, raised $200 million earlier this month at a $5 billion valuation from investors including Blackstone, Khosla Ventures, Sequoia Capital and Insight Partners. Its customer list includes Nvidia, Blackstone, Royal Bank of Canada, Palo Alto Networks, Adobe and T-Mobile.

Cognition, maker of the Devin coding agent, is substantially larger: the company raised $2 billion earlier this month at a $48 billion valuation, and counts Mercedes-Benz, NASA, Goldman Sachs and Citi among its customers. Grinberg has described Cognition as Factory’s biggest competitor.

Degnan’s own background adds another layer to the story: he was Snowflake’s first sales hire and later spent 11 years as that company’s chief revenue officer, before becoming a partner at RPT Partners — the Newport Beach-based investment firm backing Factory — roughly five months ago. His LinkedIn profile also lists him as a go-to-market advisor to startups for venture firm Iconiq, a role dating back to October of the previous year.

Why this matters beyond one dispute

The episode has reignited a broader conversation about conflicts of interest at the board level of AI startups, at a moment when venture capital firms increasingly hold stakes in directly competing companies — a pattern TechCrunch has separately reported extends to firms backing both OpenAI and Anthropic simultaneously. That dynamic is already drawing regulatory attention: Andreessen Horowitz is reportedly the subject of a Justice Department probe examining its partners’ practice of sitting on the boards of competing companies.

Whether or not Degnan’s conduct ultimately amounts to a confidentiality breach — a question that remains contested between the two sides — the dispute has become a visible flashpoint for a question the AI funding boom has made increasingly urgent: what obligations do board advisors owe a startup when the same venture ecosystem is simultaneously bankrolling, and in this case apparently helping staff, its direct rival.