The unwritten rule is breaking

For decades, venture capital had an unwritten rule: a firm does not back two companies that compete head-on. But the AI boom is straining that rule.

OpenAI and Anthropic share investors

The towering AI labs OpenAI and Anthropic share dozens of the same investors at this point, showing how the rule has already begun to crack.

Factory fires board observer over rival

At the end of September, Factory, a startup that builds an AI agent to write software, fired board observer Chris Degnan for unethical conduct involving Cognition, its direct rival.

Degnan joins Cognition as CRO

Factory's CEO alleged Degnan discussed a job at Cognition while privy to Factory's board discussions. Degnan denied sharing confidential information and soon joined Cognition as chief revenue officer.

Khosla backs both sides

Powerhouse investor Vinod Khosla sided with Degnan on X, calling Factory a struggling second tier competitor. Khosla Ventures backs both Factory and Cognition.

“a struggling second tier competitor”

Benchmark says the rule is changing

At TechCrunch Disrupt, Benchmark partners acknowledged the old rule can no longer be counted on. They described conflicts as a matter of necessity, not preference.

Companies pivot too fast to avoid conflict

Eric Vishria said every company is evolving very quickly. Companies pivot and change, and you are going to get conflicts, and that's just the reality of the current dynamic.

“you are going to get conflicts, and that's just the reality of the current dynamic”

AI accelerates the problem

Chetan Puttagunta said as the cost of building software effectively goes to zero, founders are incredibly ambitious and want to claim all surface area, making conflicts more likely.