Cognition, a standout company in the AI coding space, recruited a well-known sales executive who had previously served as an advisor to rival Factory, triggering a dispute that escalated into a public war of words. The conflict not only divided startups but also revealed differing opinions among investors within the same venture capital firm.

Clashes between competing startups and their backers occasionally erupt in Silicon Valley. But even by Silicon Valley standards, Wednesday's conflict was particularly striking. It exposed that the battle for AI talent is no longer confined to top researchers but has spread to other critical roles. It also showed that the long-standing industry taboo against venture capital firms investing in competing companies still has many adherents.

The conflict began when Cognition hired Chris Degnan. Degnan, a former Chief Revenue Officer at Snowflake, had spent about a year advising Factory through his own firm RPT Partners, which is also an investor in Factory. According to people familiar with the matter, Degnan informed Factory's management a few days ago that he would be joining Cognition. The news shocked Factory CEO Matan Grinberg and his team. Sources said Factory's management held Degnan's business judgment in high regard and had disclosed sensitive internal information to him. Another person added that on the very morning the news broke, Degnan had participated in strategic discussions on some of the company's projects.

On Wednesday, Grinberg posted on X that after learning Degnan had engaged with competitor Cognition about a position, Factory had terminated its relationship with Degnan, who was also a board observer at Factory. "Trust relationships related to the board are one of Silicon Valley's sacred bonds that keep the startup ecosystem thriving," Grinberg said, adding that Degnan had access to board-level confidential information and that "this trust was betrayed."

Shortly after, Degnan also spoke out on X, saying his business partner Chad Peets would also be joining Cognition. Degnan denied being fired, saying he voluntarily resigned from Factory on Monday after informing the team he would join Cognition, and that the last time he attended a Factory board meeting was weeks before he began talks with Cognition. "Cognition never asked me for any information about Factory, and I would never leak anything," Degnan wrote. Cognition CEO Scott Wu also posted on X rebutting Grinberg's account.

Later that day, Cognition's Chief Legal Officer Paul Grewal publicly weighed in, aligning with Scott Wu's position. "Matan's claims are false. We never sought confidential information from Factory," he said in a statement. "We hired Chris for a very straightforward reason — he is globally recognized as one of the top sales leaders."

This exchange of accusations highlights just how valuable seasoned sales leaders have become. AI startups eager to move beyond early customers — mostly other startups and tech-savvy enterprises — urgently need such talent to expand their markets. Cognition is currently in a high-growth phase: my colleagues have reported that the company's annualized revenue is about $900 million, but due to leasing large clusters of Nvidia servers, its cash burn this year could reach $800 million. Cognition previously also hired Facebook's former Chief Security Officer to head its cybersecurity business. Factory, which offers an AI agent called Droid that can write code, is also growing rapidly. Its revenue figures are not yet publicly known; two weeks ago, the company reached a valuation of $5 billion, triple its valuation from five months earlier. Factory has raised nearly $420 million, with investors including Sequoia Capital, Lux Capital, and Insight Partners.

The accusations quickly spread across Silicon Valley, with many investors weighing in on the industry issue of advisors jumping to competitors, especially when the advisor has access to board-level information. Menlo Ventures partner Matt Murphy posted on X: "Everyone should remember the responsibilities that come with board-related roles."

The situation is intriguing: more and more venture firms (such as Sequoia and Coatue) now invest in directly competing companies like OpenAI and Anthropic, likely because the sector is large enough to accommodate multiple differentiated winners. But such firms generally do not seek board seats. Many investors who spoke out were divided on who was right and who was wrong. Vinod Khosla, founder of Khosla Ventures, which invested in Cognition, was fierce on X: "You are just a struggling second-tier competitor with no basic decency, no bottom line, lying for attention — which only reveals you are running out of road." But Khosla Ventures also led Factory's $150 million Series C round in April this year. Khosla Ventures Managing Director Keith Rabois, who himself sits on Factory's board, posted: "Attending board meetings and board dinners while interviewing at a competitor is itself unethical." According to sources, Factory is unlikely to take further legal action. But the departures of Degnan and Peets have raised questions about the situation at RPT Partners. These two sales industry heavyweights are core partners at the firm, which positions itself as providing "consulting on sales strategy, marketing alignment, and go-to-market execution for founders and boards." RPT Partners has two other partners, both with backgrounds at Sutter Hill Ventures, an investor in Snowflake, as well as several associate partners.