Benchmark Admits AI Is Breaking Venture's No-Rivals Rule

Venture capital's unwritten rule — don't fund two startups that compete head-on — is getting harder to keep as artificial intelligence startups pivot and expand faster than ever, according to partners at Benchmark, the venture firm known for long-term founder bets. The comments came at TechCrunch Disrupt on Oct. 15, 2026, TechCrunch reported.

What did Benchmark's partners say at Disrupt?

Asked whether the old pact against backing rivals still holds as portfolio companies expand into each other's markets, Benchmark partner Eric Vishria called the conflicts a matter of necessity, not preference. Companies pivot and change, he said, "and you are going to get conflicts, and that's just the reality of the current dynamic," according to TechCrunch. Vishria said Benchmark stays committed to each founder and keeps what it learns confidential, adding that a venture partner's technical knowledge has limits anyway: "We are not product or technology experts."

Why is the rule under strain now?

Partner Chetan Puttagunta told the Disrupt audience that AI is speeding up the collision course. As the cost of building software "effectively goes to zero," he said, founders are "incredibly ambitious" and see a wide "surface area" they want to claim entirely, per TechCrunch. He drew a line between funding a direct competitor on day one — which he called "an easy answer" to avoid — and a portfolio company that grows into a rival's turf years later. "That happens," he said. Partner Peter Fenton called the issue "kryptonite" and the firm's toughest problem, describing a spectrum of closeness between investors and the companies they back.

"The harsh reality of this world is every company is evolving very quickly ... you are going to get conflicts, and that's just the reality of the current dynamic." — Eric Vishria, Benchmark partner, TechCrunch Disrupt, Oct. 15, 2026

What happened between Factory and Cognition?

The tension showed up in public last month. In late September 2026, Factory — which builds an AI agent that writes software — fired board observer and adviser Chris Degnan, alleging "unethical conduct involving Cognition," Factory's direct rival and maker of the Devin coding agent, TechCrunch reported. Factory's CEO said Degnan had discussed a job at Cognition while sitting in on Factory's board-level discussions. Degnan said he had already resigned and denied sharing anything confidential. He soon announced he was joining Cognition as chief revenue officer.

How does Khosla Ventures fit into this?

Investor Vinod Khosla sided publicly with Degnan on X, criticizing Factory's CEO and calling the company "a struggling second tier competitor," according to TechCrunch. Khosla Ventures backs both Factory and Cognition — the kind of dual bet that the industry's old rule was built to prevent.

Timeline

• Late September 2026: Factory fires Degnan over alleged ties to rival Cognition.
• Soon after: Degnan joins Cognition as chief revenue officer.
• Same period: Khosla Ventures' Vinod Khosla publicly backs Degnan over Factory's CEO on X.
• Oct. 15, 2026: Benchmark partners address the issue on stage at TechCrunch Disrupt.

What does it mean for founders and other investors?

Benchmark's reputation rests on 10- to 15-year partnerships with founders at the earliest stage, and Vishria said exclusivity remains "really important" at that stage. But he added: "things are evolving. There's no doubt about that." TechCrunch also noted that OpenAI and Anthropic, the two largest AI labs, already share dozens of the same investors — evidence the old boundary has been eroding well beyond one firm's portfolio.