Even Benchmark thinks AI is eroding the venture pact against backing rivals

Venture capital firm Benchmark acknowledged that the artificial intelligence boom is straining the long-standing industry rule against backing competing startups. Speaking at TechCrunch Disrupt, Benchmark partners said these portfolio overlaps are increasingly driven by necessity rather than preference as companies rapidly expand their territory. The strain was highlighted recently when software-writing AI agent startup Factory fired board observer Chris Degnan.

Factory alleged Degnan discussed a job with direct rival Cognition while accessing board discussions. Degnan denied sharing confidential information and joined Cognition as chief revenue officer. Prominent investor Vinod Khosla, whose firm backs both companies, defended Degnan on social media and criticized Factory. Benchmark partners Eric Vishria, Chetan Puttagunta, and Peter Fenton told the audience that fast-moving AI markets make conflicts harder to avoid.

Puttagunta explained that as the cost of building software falls, ambitious founders seek to claim wider market surfaces, increasing the likelihood of overlapping turf. Fenton called the issue the firm's toughest problem and described transparency as a golden rule. While Benchmark maintains that early-stage exclusivity remains vital, the partners concluded that the traditional pact can no longer be counted on as startups pivot and grow.