For decades, the unwritten rule of venture capital was that a firm doesn’t back two companies that compete head-on. However, during a discussion at TechCrunch Disrupt earlier this week, partners at Benchmark admitted that the AI boom is straining this rule.
The Evolving Landscape of AI Investment
The traditional boundaries of venture capital have been on the verge of snapping for some time. Notably, the towering AI labs OpenAI and Anthropic share numerous investors. In a recent development, Factory, a startup that creates an AI agent for software development, terminated board observer and adviser Chris Degnan for alleged "unethical conduct involving Cognition," its direct competitor and the creator of the Devin coding agent.
Degnan was accused of discussing a job at Cognition while being privy to Factory’s board-level discussions. He claimed he had already resigned and denied sharing any confidential information. Shortly after, he announced his new role as chief revenue officer at Cognition. Vinod Khosla, a prominent investor, supported Degnan on X, criticizing Factory’s CEO and labeling the company as "a struggling second tier competitor." Khosla Ventures backs both companies.
Benchmark's Shift in Perspective
Even Benchmark, known for its long-term partnerships with founders, acknowledged that the old rule can no longer be relied upon. When asked at Disrupt whether the pact against backing rivals still holds as portfolio companies expand into each other’s territory, the partners described these conflicts as a matter of necessity rather than preference. Eric Vishria, a partner at Benchmark, stated:
