Matan Grinberg, CEO of the AI startup Factory, has publicly accused VC adviser Chris Degnan of leaking confidential information to their major competitor, Cognition. This development is pivotal for AECM professionals as it underscores the critical importance of safeguarding proprietary information in the rapidly evolving AI sector.
What Happened
Matan Grinberg, co-founder and CEO of Factory, an AI coding startup, announced on X that he terminated Chris Degnan, a board adviser, for allegedly sharing confidential information with Cognition, Factory's largest competitor. Shortly after Grinberg's post, Degnan confirmed his new role as chief revenue officer at Cognition via X and LinkedIn, denying the allegations and asserting he resigned voluntarily. Degnan, previously a key figure at Snowflake and a partner at RPT Partners, had been advising Factory for five months. Factory, established three years ago in San Francisco, focuses on AI agents capable of autonomous coding tasks and recently secured $200 million in funding, elevating its valuation to $5 billion. Its clientele includes tech giants like Nvidia and Adobe. Cognition, which recently raised $2 billion at a $48 billion valuation, is a significant competitor with customers such as NASA and Goldman Sachs. Grinberg expressed concerns over how much confidential information Degnan might have shared, noting that Degnan had assured him of no interest in working for Cognition. However, Degnan later revealed ongoing discussions with Cognition, prompting Grinberg to act. Degnan disputes Grinberg's version, claiming he resigned before discussing employment with Cognition and refuting any breach of confidentiality.
What This Means for Your Business
This incident highlights the need for AECM firms to implement stringent confidentiality protocols, especially when engaging with external advisers. The rapid pace of AI innovation and the high stakes involved require robust compliance frameworks to prevent intellectual property leakage. Companies must ensure that all board advisors and partners adhere to non-disclosure agreements and conduct regular audits to safeguard sensitive information. Additionally, this situation underscores the necessity for businesses to carefully vet their advisory boards and maintain clear communication channels to address potential conflicts of interest proactively. For companies in the AI domain, maintaining competitive advantage hinges on protecting proprietary technologies and strategies.
What US Operators Should Watch
US operators should monitor evolving regulations around data privacy and intellectual property protection, particularly within the AI sector. The Federal Trade Commission (FTC) is increasingly scrutinizing data practices, and businesses should be prepared for potential regulatory changes. Additionally, companies should stay informed about developments in AI technology and competitive intelligence to anticipate market shifts and safeguard their innovations. Maintaining compliance with frameworks like the Cybersecurity Maturity Model Certification (CMMC) and the National Institute of Standards and Technology (NIST) guidelines will be crucial in protecting sensitive information and ensuring business continuity.
Source: https://techcrunch.com/2026/09/30/factory-ceo-just-accused-his-vc-board-advisor-of-spying-for-cognition/. Read the original story ->
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