Menlo Ventures partner Matt Murphy and his team announced that the firm has invested in AI coding startup Factory as part of the company’s latest funding round, which values Factory at $5 billion. While Menlo declined to disclose the exact amount, sources indicate the investment was significant and that Menlo would have invested more if additional cap table space had been available.

This investment comes shortly after Factory’s co-founder and CEO, Matan Grinberg, publicly accused former board advisor Chris Degnan of potentially sharing confidential information with Factory’s competitor, Cognition. Degnan, who recently joined Cognition as chief revenue officer, disputed the claims, stating he resigned voluntarily and had declined a competing offer from Factory.

The dispute drew widespread attention within the tech community, with notable figures taking sides. Vinod Khosla, whose firm invests in both Factory and Cognition, criticized Factory harshly, labeling it a "struggling second tier competitor" and questioning Grinberg’s account of Degnan’s departure.

Menlo Ventures’ investment and public endorsement of Factory serve as a counterpoint to Khosla’s remarks, highlighting confidence in Factory’s leadership, technology, and customer relationships. Matt Murphy, known for backing Anthropic early, has a track record of identifying promising AI ventures, and some industry observers are now referring to Factory as "the next Anthropic."

Sequoia’s Shaun Maguire, another Factory investor who supported Grinberg publicly, welcomed Menlo’s involvement, praising the firm’s recent investment momentum. Notably, Menlo Ventures does not hold an investment in Cognition, Factory’s competitor.

Menlo’s commitment signals strong support for Factory’s position in the competitive AI coding market amid ongoing investor tensions.