For decades, the unwritten rule of venture capital was that a firm doesn't back two companies that compete head-on. But speaking at Tech Crunch Disrupt, Benchmark partners acknowledged the AI boom is straining that rule. Open AI and Anthropic share dozens of the same investors.
In September, Factory fired board observer Chris Degnan for "unethical conduct involving Cognition," its direct rival. Degnan joined Cognition as chief revenue officer. Powerhouse investor Vinod Khosla sided with Degnan, calling Factory "a struggling second tier competitor." Khosla Ventures backs both companies.
Even Benchmark, whose reputation rests on 10-to-15-year partnerships, said the old rule can no longer be counted on. Eric Vishria said every company evolves quickly, creating conflicts as a matter of necessity, not preference. Chetan Puttagunta said AI accelerates the problem as software costs go to zero, making founders ambitious.
Peter Fenton called it "kryptonite," describing a spectrum from co-founder to public-market stock picker. Benchmark sits near the co-founder end, treating transparency as a golden rule. Founders should never feel shortchanged if conflicts emerge.
Benchmark isn't declaring the pact dead, but when a firm built on loyalty says conflicts are coming, founders might wonder who else will be this candid.
Source: TechCrunch Venture · Summarized by HeadlinesBriefing