Brief
Benchmark says AI boom is breaking traditional VC no‑compete rule
At TechCrunch Disrupt, Benchmark partners explained how AI startups’ rapid expansion is eroding the venture‑capital rule against backing direct competitors.
By Felo News Desk · Published
At TechCrunch Disrupt earlier this week, Benchmark partners said the surge in artificial‑intelligence startups is straining the venture‑capital tradition of not backing two companies that compete head‑on.
What happened
Benchmark, a firm known for long‑term founder relationships, was asked whether its historic “no‑rival” pact still holds as portfolio companies expand into each other’s territory. Partners acknowledged that conflicts are now a matter of necessity, not preference, citing the rapid evolution of AI firms.
What the reports add
The article notes that OpenAI and Anthropic now share dozens of the same investors, illustrating how overlapping capital pools are becoming common. It also references a recent dispute between Factory, an AI‑agent‑for‑software startup, and its rival Cognition, where Factory fired board observer Chris Degnan over alleged “unethical conduct” and he later joined Cognition as chief revenue officer.
What was said
"The harsh reality of this world is every company is evolving very quickly," Benchmark partner Eric Vishria told TechCrunch Disrupt, adding that conflicts are inevitable as companies pivot. "Exclusivity remains really important at the very early stage, but things are evolving." Chetan Puttagunta said the cost of building software is approaching zero, making founders “incredibly ambitious” and likely to run into each other’s space. Peter Fenton described the situation as "kryptonite" for investors and emphasized transparency, saying, "There shouldn’t be the surprise after the fact."
How it came about
Benchmark’s stance reflects a broader shift in venture capital highlighted in earlier Felo coverage of AI‑focused funds, such as BAG Ventures’ $11.3 million fund for early‑stage AI startups and Protego Ventures’ $125 million defence‑tech fund, both launched in September 2026. Those funds illustrate the growing capital flow into AI, which is prompting firms like Benchmark to reassess old partnership rules.
Key facts
- Benchmark partners said the AI boom is eroding the VC no‑compete rule. (techcrunch.com)
- Factory fired board observer Chris Degnan over alleged unethical conduct involving rival Cognition. (techcrunch.com)
- Benchmark’s Eric Vishria described conflicts as a necessary reality of fast‑evolving AI companies. (techcrunch.com)
- Peter Fenton called AI‑driven portfolio conflicts "kryptonite" for investors. (techcrunch.com)
- Chetan Puttagunta warned that near‑zero software‑building costs will increase founder ambition and overlap. (techcrunch.com)
Sources
- [1] techcrunch.com — originally reported as “Even Benchmark thinks AI is eroding the venture pact against backing rivals”
