Benchmark partners note AI boom is testing venture norms on rival investments
Shifting startup boundaries and overlapping bets complicate long-standing industry taboos against funding direct competitors.
Partners at Benchmark acknowledged that the rapid pace of artificial intelligence development is eroding venture capital's traditional taboo against financing direct competitors [1].
Speaking on the shifts across the sector, Benchmark partner Eric Vishria observed that "the harsh reality of this world is every company is evolving very quickly" [1]. The remarks point to broader friction within startup boardrooms as software offerings broaden and overlap, placing rival companies inside shared investment portfolios [1].
The tension was underscored by recent portfolio overlap involving Khosla Ventures, which holds stakes in both Factory and Cognition [1]. Factory dismissed board observer Chris Degnan over allegations of unethical conduct concerning Cognition, according to reporting on the conflict [1]. Degnan was subsequently hired by Cognition to serve as its chief revenue officer [1]. Benchmark partners Chetan Puttagunta and Peter Fenton also noted the pressure changing market boundaries place on standard governance norms [1].
Questions and answers
What venture capital practice is under pressure?
The traditional industry norm where venture firms avoid backing competing startups within the same sector.
What happened between Factory and Cognition?
Factory removed board observer Chris Degnan citing alleged unethical conduct related to Cognition, which later appointed Degnan as chief revenue officer. Khosla Ventures is an investor in both firms.
Companies & investors in this story
Sources
- 1.Even Benchmark thinks AI is eroding the venture pact against backing rivals — TechCrunch Venture, Oct 16, 2026