Menlo declined to disclose how much it invested, but a source familiar with the deal told TechCrunch the investment was significant to the firm rather than a token gesture, and that Menlo would have invested more had there been room on the cap table.
The investment carries unusual weight given the circumstances. Last week, Factory co-founder and CEO Matan Grinberg alleged he had fired Chris Degnan of RPT Partners from his role as board advisor, saying he feared Degnan may have shared confidential information with Factory's biggest competitor, Cognition. The accusation followed Degnan's move to Cognition as its chief revenue officer.
The public dispute drew responses across the tech industry, most notably from Vinod Khosla, whose firm invests in both Factory and Cognition. Khosla called Factory a desperate "struggling second tier competitor" and accused Grinberg of lying about firing Degnan and impugning his character. Degnan disputed Grinberg's account, saying he resigned and had rebuffed a competing job offer from Grinberg.
Menlo's endorsement praised Factory's founders, its technology, and its relationships with customers, signalling the firm does not share Khosla's assessment. Murphy previously bet his firm on Anthropic when it appeared to trail OpenAI, and has been on a hot streak since, landing deals with Lovable and Legora. Some VCs are now calling Factory "the next Anthropic."
Sequoia's Shaun Maguire, a Factory backer who came out in support of Grinberg last week, welcomed Menlo's investment, saying the firm is "on a tear." Notably, Menlo is not an investor in competitor Cognition.