Benchmark says AI is making rival investments harder for venture firms to avoid

Benchmark partners said at TechCrunch Disrupt this week that investors cannot count on keeping their startups out of one another’s markets. As AI companies pursue wider ambitions, businesses that once looked distinct can become rivals. The partners’ answer was not to abandon founder loyalty, but to emphasize confidentiality and transparency.

The collision can come after the investment

The discussion addressed an unwritten venture-capital rule: a firm should not back two companies competing head-on. Asked whether that pact still holds when companies enter each other’s territory, Benchmark’s partners described a distinction between choosing rivals at the start and managing competition that develops later.

Eric Vishria said companies change direction so quickly that conflicts will arise. He did not present those clashes as Benchmark’s preferred approach. Exclusivity remains “really important” at the very early stage the firm favors, he said, while acknowledging that the circumstances around those commitments are changing.

Chetan Puttagunta connected the problem directly to AI. In his account, the cost of building software “effectively goes to zero,” encouraging ambitious founders to pursue a much wider set of opportunities. That is his explanation for why companies increasingly run into one another—not an independently established measure of software costs.

Puttagunta called the decision about a direct competitor at the outset “an easy answer.” A company later expanding into another investment’s market is different. His warning was about that second situation: the boundaries around an investment can move even when the investor has not deliberately chosen to fund a head-on rival.

There shouldn’t be the surprise after the fact.

Peter Fenton, Benchmark partner, speaking at TechCrunch Disrupt

A partner, not just a stock picker

Peter Fenton called conflicts “kryptonite” and Benchmark’s toughest problem. He described investor relationships as a spectrum. A co-founder would never work on a competing business; a public-market stock picker can own several rivals because the role is allocating money rather than helping shape the companies.

Benchmark sits closer to the co-founder end, Fenton said. That positioning carries an obligation beyond disclosing an investment: if competition emerges, a founder should not feel shortchanged. He described transparency as a golden rule, with no surprise after the conflict has already taken shape.

Vishria separately emphasized Benchmark’s commitment to each founder and to keeping information confidential. He also downplayed how much technical knowledge an investor could pass between companies, saying, “We are not product or technology experts.” Those were assurances about how the firm handles its relationships, not a declaration that exclusivity no longer matters.

A confidentiality dispute gives the issue stakes

The remarks followed a public dispute between AI coding rivals Factory and Cognition. At the end of September, Factory said it was firing board observer and adviser Chris Degnan for “unethical conduct involving Cognition.” Factory’s chief executive alleged that Degnan discussed a job at Cognition while privy to Factory’s board-level discussions.

Degnan said he had already resigned and denied sharing confidential information. He subsequently announced that he was joining Cognition as chief revenue officer. Vinod Khosla sided with Degnan on X and criticized Factory’s CEO; Khosla Ventures backs both companies.

Vishria said Benchmark had been fortunate to avoid “that type of insane direct conflict,” apparently referring to the Factory–Cognition dispute. His qualification kept the firm’s position narrower than a blanket acceptance of rival investments: overlap may become harder to prevent, but early-stage exclusivity remains important.