Key Takeaways
- • Benchmark partners conceded at TechCrunch Disrupt that the AI boom is straining the venture rule against backing direct competitors, describing conflicts as a matter of necessity rather than preference.
- • Eric Vishria said "you are going to get conflicts, and that's just the reality of the current dynamic," while stating Benchmark remains committed to each founder and keeps information confidential.
- • Chetan Puttagunta said AI is accelerating the problem because the cost of building software "effectively goes to zero," making founders more ambitious and more likely to expand into rivals' territory.
- • Peter Fenton called the issue "kryptonite" and Benchmark's toughest problem, stating transparency is a golden rule and that "there shouldn't be the surprise after the fact."
- • The article cites the late-September Factory-Cognition dispute as an example of the tension, in which Khosla Ventures backs both companies.
Summary
At TechCrunch Disrupt, partners at Benchmark acknowledged that the AI boom is straining the long-standing venture capital norm against backing two companies that compete head-on. According to TechCrunch, the rule has been under pressure for some time, as OpenAI and Anthropic now share dozens of the same investors.
The article points to a recent dispute as a concrete example. In late September, Factory, which builds an AI agent for writing software, fired board observer and adviser Chris Degnan for "unethical conduct involving Cognition," its direct rival and maker of the Devin coding agent. Factory's CEO alleged Degnan discussed a job at Cognition while privy to board-level discussions. Degnan said he had already resigned and denied sharing confidential information, and he subsequently joined Cognition as chief revenue officer. Vinod Khosla, whose Khosla Ventures backs both companies, sided with Degnan on X and called Factory "a struggling second tier competitor."
Benchmark, which builds its reputation on long-term partnerships with early-stage founders, said the old rule can no longer be relied upon. Eric Vishria said conflicts arise because companies evolve quickly, and he noted Benchmark stays committed to each founder and keeps what it learns confidential. He downplayed the value of VC insight, stating "We are not product or technology experts," and said Benchmark has been fortunate to avoid "that type of insane direct conflict." He added that exclusivity remains "really important" at the early stage Benchmark favors, but that "things are evolving."
Chetan Puttagunta argued AI is accelerating the problem, as founders see a "surface area" they want to claim and "it's probably going to happen more, where you start to run into each other." He distinguished a direct competitor at the outset, which he called "an easy answer," from a portfolio company that expands into another's turf over time.
Peter Fenton described the issue as the firm's toughest problem and placed Benchmark nearer the co-founder end of a spectrum of investor relationships, away from public-market stock pickers who can hold rivals because they only allocate capital. He said transparency is a golden rule and that founders should never feel shortchanged if a conflict emerges.
The article concludes that Benchmark is not declaring the pact dead, but its candor suggests conflicts among portfolio companies are becoming more common in the AI era.
The article points to a recent dispute as a concrete example. In late September, Factory, which builds an AI agent for writing software, fired board observer and adviser Chris Degnan for "unethical conduct involving Cognition," its direct rival and maker of the Devin coding agent. Factory's CEO alleged Degnan discussed a job at Cognition while privy to board-level discussions. Degnan said he had already resigned and denied sharing confidential information, and he subsequently joined Cognition as chief revenue officer. Vinod Khosla, whose Khosla Ventures backs both companies, sided with Degnan on X and called Factory "a struggling second tier competitor."
Benchmark, which builds its reputation on long-term partnerships with early-stage founders, said the old rule can no longer be relied upon. Eric Vishria said conflicts arise because companies evolve quickly, and he noted Benchmark stays committed to each founder and keeps what it learns confidential. He downplayed the value of VC insight, stating "We are not product or technology experts," and said Benchmark has been fortunate to avoid "that type of insane direct conflict." He added that exclusivity remains "really important" at the early stage Benchmark favors, but that "things are evolving."
Chetan Puttagunta argued AI is accelerating the problem, as founders see a "surface area" they want to claim and "it's probably going to happen more, where you start to run into each other." He distinguished a direct competitor at the outset, which he called "an easy answer," from a portfolio company that expands into another's turf over time.
Peter Fenton described the issue as the firm's toughest problem and placed Benchmark nearer the co-founder end of a spectrum of investor relationships, away from public-market stock pickers who can hold rivals because they only allocate capital. He said transparency is a golden rule and that founders should never feel shortchanged if a conflict emerges.
The article concludes that Benchmark is not declaring the pact dead, but its candor suggests conflicts among portfolio companies are becoming more common in the AI era.
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