Vinod Khosla trashed a portfolio company — and the startup world has thoughts

• Vinod Khosla bashed Factory AI, a startup that his VC firm has invested in.
• Khosla’s comments about Factory drew backlash from some founders and tech VCs.
• Khosla Ventures is an investor in two software development startups that are feuding.

In Silicon Valley, investing in competitors is increasingly standard practice. Publicly trashing one of them is not.

Vinod Khosla, the founder of Khosla Ventures, sparked a wave of criticism on Wednesday after publicly taking sides in a spat between Factory AI and Cognition — two rival AI coding startups — even though his firm has invested in both of them.

Khosla sided emphatically with Cognition, calling Factory a “struggling second tier competitor” and accusing its founder of lying out of “desperation.”

Khosla’s comments came after Factory CEO Matan Grinberg said the company was terminating Chris Degnan, its board observer and advisor, for “unethical conduct involving Cognition.” Degnan said he had resigned before any termination and disputed sharing Factory information with Cognition.

Degnan announced shortly afterward that he was joining Cognition as its chief revenue officer. Cognition CEO Scott Wu denied the company had asked employees to gather information about competitors “under-the-table.”

All of this played out in the very public arena of X, and Khosla’s comments were met with disagreement from startup founders and investors.

“If they are struggling second-tier losers, why did you just invest in them a few weeks ago at a multi-billion dollar valuation?” wrote Palmer Luckey, the cofounder of defense technology company Anduril, in a Thursday reply on X.

Khosla Ventures was a key investor in Factory’s $200 million funding round that it announced last month.

Khosla Ventures did not respond to a request for comment.

Spenser Skates, the CEO of product analytics company Amplitude, wrote that it was “another great reason not to raise from Vinod.” He called Khosla “one of the biggest bullies of founders in the VC ecosystem” and added that the investor was doing so to “one of his own portfolio companies no less.”

Khosla Ventures’ managing director, Keith Rabois, appeared to take the side of Factory AI.

“To even sit for an interview while having access to board-level information and without resigning is absolutely insane,” Rabois wrote on X.

Nathan Lands, an entrepreneur and angel investor in Factory, said Khosla had “clearly crossed a line,” adding that founders should not let VCs tell them that conflicts of interest do not matter.

The spat and Khosla’s comments also opened the meme floodgates.

Olivia Moore, a partner at Andreessen Horowitz, joined in with a meme captioned: “VCs ‘adding value.’”

The backlash puts a spotlight on an awkward yet increasingly common practice in the AI boom: venture firms spreading bets across rival startups.

Cognition, the maker of the AI coding agent Devin, is valued at $48 billion after raising more than $2 billion in September. Factory AI, which hit a $5 billion valuation last month, sells AI “Droids” designed to automate work across the software-development process.

At the frontier-lab level, Sequoia Capital and Founders Fund are among the firms that have backed both OpenAI and Anthropic, despite the companies’ fierce competition for talent, customers, and computing.

In June, a Wired analysis of PitchBook data found that roughly 90 investors hold stakes in both labs. Salesforce Ventures has also invested in competing AI labs, Cohere and Mistral AI.