Menlo Ventures invests in Factory at $5B valuation days after Vinod Khosla spat

Menlo puts money into Factory

Menlo Ventures has invested in Factory, the AI coding startup, announcing the move in a Monday blog post from partner Matt Murphy, according to TechCrunch. The investment forms part of Factory's latest funding round, unveiled last month at a $5 billion valuation. Menlo would not disclose the size of its check, but a person familiar with the deal told TechCrunch the commitment was substantial rather than symbolic, and that the firm would have put in more money had there been room left on the cap table.

Extending a previous round to add a new investor is normally unremarkable in venture capital. Here, the timing is the story.

The dispute that set the stage

Days earlier, Factory had been consumed by a public falling-out. As TechCrunch reports, co-founder and CEO Matan Grinberg said he had fired Chris Degnan of RPT Partners from his role as a board advisor, over fears that Degnan might have shared confidential information with Cognition, Factory's biggest competitor. Those concerns followed Degnan's move to Cognition as its chief revenue officer.

Degnan disputes that account. TechCrunch reports he says he resigned, and that he rebuffed a competing job offer from Grinberg.

The quarrel pulled figures from across the tech industry into the debate, but none landed harder than Vinod Khosla, whose firm holds stakes in both Factory and Cognition. Per TechCrunch, Khosla called Factory a desperate "struggling second tier competitor" and accused Grinberg of lying about the firing and of attacking Degnan's character.

Against that backdrop, Menlo's full-throated endorsement, which praised Factory's founders, its technology and its customer relationships, reads as far more than a routine financing add-on. TechCrunch frames it as a statement that Factory is not in the state Khosla implied.

A bet from an investor on a streak

The endorsement also carries weight because of who is making it. Murphy steered Menlo into Anthropic back when the lab looked like a distant runner-up to OpenAI, and that bet kicked off a run of deals including Lovable and Legora, according to TechCrunch. Some investors are now reportedly calling Factory "the next Anthropic" — a label that says as much about Murphy's recent record as about Factory itself.

Sequoia partner Shaun Maguire, an existing Factory backer who publicly sided with Grinberg during last week's dispute, welcomed Menlo's move, saying the firm is "on a tear." TechCrunch also notes a relevant detail: unlike Khosla Ventures, Menlo holds no stake in Cognition, so its position in the category is not split between the two rivals.

Why it matters

Venture capital is partly a reputational business, and Factory took a very public reputational hit last week. A meaningful check from a firm with Menlo's recent track record, placed within days of Khosla's attack, signals to customers, employees and future investors that at least one well-informed backer does not see a struggling second-tier company. The episode also highlights the tension built into cross-portfolio investing: Khosla's stakes in both Factory and Cognition shaped how his criticism was received, while Menlo's undivided position gives its endorsement a cleaner signal. And with AI coding tools among the most fiercely contested corners of the software market, the perception of momentum increasingly matters as much as the underlying numbers — which, in this case, remain undisclosed.