Even Benchmark thinks AI is eroding the venture pact against backing rivals
- ID
- 36174
- Status
- summarized
- Published
- 16 Oct 2026, 1:16 PM
- Fetched
- 16 Oct 2026, 1:30 PM
- Provider
- TechCrunch
- Category
- technology
- Original URL
- https://techcrunch.com/2026/10/15/even-benchmark-thinks-ai-is-eroding-the-venture-pact-against-backing-rivals/
- Source URL
- https://techcrunch.com/feed/
Summary
- Score
- 6.5
- Created
- 16 Oct 2026, 1:31 PM
- Tags
- Audience
- saas_startup_foundersai_ml_learnersai_agent_users
What happened
At TechCrunch Disrupt, Benchmark partners said the unwritten VC rule against backing direct rivals can no longer be counted on as the AI boom strains it. The article cites Factory firing board observer/adviser Chris Degnan over “unethical conduct involving Cognition,” its direct rival and maker of Devin; Degnan said he had already resigned, denied sharing confidential information, and then announced he was joining Cognition as chief revenue officer. Vinod Khosla sided with Degnan on X and called Factory “a struggling second tier competitor,” while Benchmark’s Eric Vishria said conflicts are now a necessity because companies evolve quickly and downplayed what a VC could pass along, saying “We are not product or technology experts.”
Why it matters
For founders raising in AI/agent tooling, the practical change is that an investor’s other portfolio companies are now a diligence item: ask what board observers/advisers can see, how conflicts are walled off, and whether the firm backs a direct competitor. The Factory–Cognition episode shows the risk is not theoretical—confidential board-level discussions and hiring can collide—so if you are building a coding agent or SaaS with overlapping AI roadmaps, document access controls before giving observer rights.
Discussion angle
Should AI founders treat overlapping investors as a red flag or just a disclosure item, and what specific information walls would you demand before giving a board observer seat?