Menlo Ventures has announced an investment in AI coding startup Factory, following a public dispute involving Factory's chief executive and prominent venture capitalist Vinod Khosla. The investment was confirmed on Monday, October 5, 2026, by Menlo Ventures partner Matt Murphy and his team in a blog post, according to TechCrunch.
The venture capital firm declined to disclose the specific amount of its investment. However, TechCrunch reported that the deal is part of Factory’s most recent funding round, which was announced last month and valued the startup at $5 billion. A source familiar with the deal indicated to TechCrunch that Menlo's investment was substantial, not merely symbolic, and that the firm would have committed more capital if there had been additional space on Factory's cap table.
Context of the Investment
Menlo Ventures' endorsement comes days after Factory co-founder and CEO Matan Grinberg was involved in a highly public disagreement with investor Chris Degnan and subsequently with Vinod Khosla. The dispute began last week when Grinberg alleged he had fired Degnan, an investor from RPT Partners, from his role as a board advisor, according to TechCrunch. Grinberg expressed concerns that Degnan might have shared confidential information with Cognition, a key competitor to Factory. This accusation followed Degnan's move to Cognition, where he assumed the position of chief revenue officer.
The situation escalated as various figures in the technology industry voiced their opinions, either supporting Degnan or Factory. A notable intervention came from Vinod Khosla, whose firm is an investor in both Factory and Cognition. TechCrunch reported that Khosla publicly criticized Factory, describing it as a desperate "struggling second tier competitor." He also accused Grinberg of dishonesty regarding Degnan's departure and of impugning Degnan's character. Degnan, for his part, disputed Grinberg's account, stating that he resigned from his advisory role and had turned down a competing job offer from Grinberg.
Menlo's Endorsement and Industry Reaction
In this climate, Menlo Ventures' investment has been characterized as a strong vote of confidence in Factory. TechCrunch noted that Menlo's "full-throated endorsement" praised Factory's founders, its technology, and its relationships with customers. This move is seen as a direct counter-statement to Khosla's earlier implications about Factory's stability and market position.
Matt Murphy, the Menlo Ventures partner leading the investment, has a track record of successful early bets. TechCrunch highlighted Murphy's previous decision to invest in Anthropic when it was considered an underdog compared to OpenAI, and his subsequent investments in companies such as Lovable and Legora. This history has led some venture capitalists to refer to Factory as "the next Anthropic."
Shaun Maguire of Sequoia, another existing backer of Factory who publicly supported Grinberg on the social media platform X last week, expressed enthusiasm for Menlo's endorsement, stating that the firm is "on a tear," according to TechCrunch. Notably, Menlo Ventures is not an investor in Factory's competitor, Cognition.
The investment by Menlo Ventures signals continued support for Factory from a significant segment of the venture capital community, despite the recent public controversies surrounding the AI coding startup.
