Factory says its board observer spent weeks talking to Cognition before joining it as revenue chief

Degnan denies the allegations ^[5], but his own account places his disclosure at the point he resigned and told Grinberg he was joining Cognition ^[6]. Grinberg's complaint is about the stretch before that. "For weeks, while he sat in our board meetings and advised our leadership team, he was also confiding with executives of our largest competitor," Grinberg wrote ^[3]. By Grinberg's account, those weeks included recurring conversations with Cognition executives while Degnan advised Factory on confidential matters ^[2].

Keith Rabois, a managing director at Khosla Ventures, offered a rule for that interval. "It is unethical per se to even interview at a competitor while attending Board meetings and Board dinners," he wrote ^[14]. It is a strict standard, and it applies only where a company writes it into the terms of the seat. Business Insider's report does not describe the terms of Degnan's observer or advisor role, so whether he broke any written obligation cannot be judged from the record.

Nothing in the record shows information left Factory. "Cognition has never asked about information on Factory, nor would I ever give it," Degnan wrote ^[8]. Cognition CEO Scott Wu rejected Grinberg's separate claim about fake job candidates ^[9]. "We would never ask our engineers or anyone on our team to collect info about any competitor under-the-table," Wu wrote ^[10]. Grinberg, Degnan and Cognition did not respond to Business Insider's requests for comment ^[16].

The seat was also where the recruiting happened. Degnan advises several startups and was Snowflake's chief revenue officer ^[5]. By his account, Grinberg asked him to consider a full-time job at Factory, and he declined ^[7]. On that account, Factory was bidding for the same executive Cognition went on to hire, while he held an observer seat in its board room ^[1][7].

The conflict runs through the investors as well. Khosla Ventures invested in Cognition and led Factory's previous round ^[13]. Vinod Khosla, its founder, called Factory a "struggling second tier competitor" acting out of desperation ^[13], while Rabois, at the same firm, sided with Factory ^[14]. The money supports Khosla's ranking. Cognition's $48 billion valuation is 9.6 times Factory's $5 billion ^[1], and its raise of more than $2 billion is at least ten times Factory's $200 million ^[2]. Even on Khosla's reading, the facts in dispute are when the talks began and when Factory was told ^[3][6].

For a founder granting an observer or advisor seat this quarter, the trade-off is a harder conversation at signing. The two terms at issue here are a notice rule for talks with competitors and a defined exit, and I'd expect both to cost little to agree while the relationship is friendly. Without them, the next contested departure gets settled by what each side posts, as this one is on X ^[2][6].