A boardroom exit has two multibillion-dollar AI startups trading accusations

Cognition CEO Scott Wu Kent NISHIMURA / AFP via Getty Images Startup Factory AI says a former advisor held meetings with rival Cognition while advising the company. Factory also alleges Cognition employees posed as job applicants to seek product information. Degnan, the former board member, and Cognition deny that information about Factory was sought or shared. Factory AI and Cognition, two high-profile San Francisco-based AI startups building coding agents, are publicly feuding over the departure of a former Factory board observer and advisor who is joining Cognition as chief revenue officer. Factory CEO Matan Grinberg posted on X on Wednesday that the company had terminated Chris Degnan's role after learning that he had been holding recurring conversations with Cognition executives while advising Factory on confidential matters. The dispute highlights the high stakes in the AI coding market, where startups and Big Tech are racing to build autonomous software engineers to sell to enterprise customers. Cognition is best known for Devin, an AI coding agent designed to automate software engineering tasks. Factory sells a product that helps companies deploy AI agents across the software development process. "It feels as though ethics is being thrown out of the window in the AI era," Grinberg wrote. "For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor." Grinberg also alleged that Cognition employees faked interviews with Factory to gain access to internal information. Degnan, who is an advisor to several startups and previously served as Snowflake's chief revenue officer, denied the allegations. He wrote on X that he had resigned from Factory this week and that he had told Grinberg he was joining Cognition. According to Degnan's post, Grinberg asked him to consider a full-time position at Factory, but he declined. "Cognition has never asked about information on Factory, nor would I ever give it," Degnan wrote. Grinberg, Degnan, and Cognition did not respond to requests for comment. Cognition CEO Scott Wu also disputed Grinberg's allegations. Wu rejected Grinberg's claim that Cognition employees had posed as job candidates to gather information about Factory's products before recruiting people with knowledge of its confidential plans. "We would never ask our engineers or anyone on our team to collect info about any competitor under-the-table," Wu wrote on X. The clash comes weeks after both companies announced major funding rounds that underscored investor enthusiasm for AI coding tools. Earlier this month, Factory announced a $200 million fundraise at a $5 billion valuation. Cognition raised more than $2 billion at a $48 billion valuation just days earlier. In an unprecedented move, Khosla Ventures founder Vinod Khosla, whose firm previously invested in Cognition and led Factory's previous fundraise, wrote on X that Factory was a "struggling second tier competitor" acting out of desperation. Keith Rabois, managing director at Khosla Ventures, took the other side. "It is unethical per se to even interview at a competitor while attending Board meetings and Board dinners," he wrote on X. Competitive conflicts have prompted high-profile board departures in Silicon Valley before, though rarely with such public accusations. Former Google CEO Eric Schmidt resigned from Apple’s board in 2009 as the companies became more direct competitors. LinkedIn cofounder Reid Hoffman stepped down from OpenAI’s board in 2023, citing potential conflicts involving his investments and AI startup activities. Henry Chandonnet contributed reporting. Have a tip? Contact Rya Jetha via email at rjetha@businessinsider.com or Signal at rjetha.07. Use a personal email address and a nonwork device; here's our guide to sharing information securely. Read the original article on Business Insider