Venture capital firm Benchmark has formally accused a founder in its portfolio of "unethical conduct involving Cognition," alleging he funneled support to a rival artificial intelligence startup while holding a board seat at a Benchmark-backed company, according to a dispute that has spilled into public view.
The conflict centers on Matt Degnan, whom Benchmark characterizes as "a struggling second tier competitor" whose conduct it says violated the unwritten rule that venture investors and the founders they back do not fund each other's direct rivals. The accusation marks a rare public fracture among Silicon Valley's most established firms, which typically resolve such disputes privately.
At stake is the venture industry's long-standing non-compete norm — an informal pact in which investors agree not to back companies that compete directly with existing portfolio holdings. Benchmark's complaint suggests that norm is eroding as capital floods into AI and founders gain leverage to work across multiple firms simultaneously.
Cognition, the AI coding startup behind the Devin software engineer, has become one of the sector's most closely watched companies since launching in March 2024. The startup raised $175 million at a $2 billion valuation led by Founders Fund, and its tools have drawn scrutiny from developers who question how much autonomous coding the product actually delivers.
Benchmark, founded in 1995, has backed companies including Uber, eBay, and Twitter. Its partners have historically taken an aggressive posture toward protecting portfolio interests, and the firm's decision to name a founder publicly rather than settle quietly signals how seriously it views the alleged breach.
"The harsh reality of this world is every company is evolving very quickly," a person familiar with the matter said, describing an AI market where talent, capital, and competitive lines shift faster than traditional venture agreements can accommodate.
The dispute reflects a broader tension in AI investing: as the number of credible startups shrinks and valuations climb, investors face pressure to place bets across competing companies to avoid missing the next winner. Founders, meanwhile, increasingly operate as serial investors themselves, blurring the line between operator and backer.
Neither Benchmark nor Degnan has filed litigation, and the terms of any resolution remain unclear. Representatives for Benchmark and Cognition did not respond to requests for comment.
