Factory CEO Ousts VC Board Advisor Amid Spy Allegations for Cognition

Introduction

The AI startup battlefield just got more personal. When a founder turns on a trusted board member, it sends shockwaves through the ecosystem. Such is the case with Factory's CEO and a prominent venture advisor.

What Happened

Factory CEO Matan Grinberg announced he'd fired Chris Degnan as a board advisor, alleging the veteran venture executive shared sensitive company secrets with Cognition, the maker of the Devin coding agent. Just hours later, Degnan confirmed he'd joined Cognition as chief revenue officer, having spent decades at Snowflake and most recently advising startups from RPT Partners and Iconiq.

The breach centers on a weeks-long period where Degnan sat in board meetings while quietly confiding with Cognition executives, a detail Grinberg only discovered when Degnan revealed ongoing negotiations late last week. Grinberg's public statement emphasized the violation of confidentiality obligations and the threat it poses to product strategy integrity.

Why This Matters

Beyond this individual case, the episode highlights the fragile trust that underpins startup governance. In an era where AI companies race to outpace one another, board members with ties to multiple players create inherent conflicts.

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• Founders rely on board advisors to guide strategy without compromising competitive advantage.
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• Perceived conflicts can erode investor confidence and stall momentum.
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• Industry-wide, similar dynamics are reshaping how governance is structured.
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Key Takeaways

This episode offers hard-won lessons for anyone navigating the intersection of AI innovation and venture governance.

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• Founders should establish clear confidentiality boundaries with all board advisors from day one.
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• Venture capitalists must disclose any concurrent relationships with competing firms to avoid perception—or reality—of divided loyalty.
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• Trust, once broken, is difficult to rebuild, and the Factory-Degnan-Cognition saga serves as a cautionary tale for the AI arms race.
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Conclusion

The split between Factory and its board advisor underscores a growing tension in the AI sector: the fine line between strategic collaboration and competitive betrayal. As the industry accelerates, both founders and investors will need to navigate these waters with unprecedented clarity. The story reminds us that in the race to build the next breakthrough, trust remains the most valuable—and most vulnerable—asset.