{
  "id": 14880021,
  "title": "Even Benchmark thinks AI is eroding the venture pact against backing rivals",
  "url": "https://urgent.news/2026/10/16/even-benchmark-thinks-ai-is-eroding-the-venture-pact-against-backing",
  "topic": "ai",
  "section": "AI",
  "published": "2026-10-16T05:16:46.000Z",
  "source": {
    "name": "TechCrunch",
    "slug": "techcrunch",
    "url": "https://techcrunch.com/2026/10/15/even-benchmark-thinks-ai-is-eroding-the-venture-pact-against-backing-rivals/"
  },
  "original_language": "en",
  "account": "Even Benchmark acknowledges that venture capital's long-standing unwritten rule of not backing competing companies is being challenged by the rapid growth of the AI industry. At TechCrunch Disrupt earlier this week, Benchmark partners admitted that the rule is under strain. For years, it was understood that venture firms would not invest in two companies that directly competed with each other. However, the surge in AI startups has made this rule increasingly difficult to maintain. OpenAI and Anthropic, two major AI labs, share many investors, and now Factory, a startup that builds an AI-powered software writing tool, has fired a board observer for allegedly discussing a job offer at a direct competitor. The fired board member has since joined the rival company. This conflict has prompted other heavyweight investors, like Vinod Khosla, to side with the fired employee, even though Khosla Ventures also backs both companies. Benchmark, a firm known for its long-term partnerships with founders, now recognizes that the old rule can no longer be relied upon. Benchmark's partners acknowledged that conflicts are a matter of necessity due to the rapid evolution of companies and their expansion into each other's territories. They emphasized that while they remain committed to each founder and keep information confidential, they are not product or technology experts. Benchmark's CEO, Eric Vishria, noted that the firm has been fortunate so far to avoid direct conflicts, but he admitted that the industry is experiencing this type of situation more frequently. Chetan Puttagunta, another Benchmark partner, attributed the increasing conflicts to the decreasing cost of building software, which has made founders more ambitious and led them to aim for a broader market share. He differentiated between direct competitors and portfolio companies expanding into each other's areas over time, stating that the latter is more common. Peter Fenton, another Benchmark partner, called the issue \"kryptonite\" and the firm's toughest challenge. He described the relationship between investors and their portfolio companies as ranging from co-founders, who would never work for a competitor, to public-market stock pickers who can invest in several rivals. Benchmark, which prides itself on transparency, maintains that conflicts should never surprise founders. However, the increasing frequency of conflicts raises questions about the sustainability of the long-standing pact against backing rivals.",
  "summary": "Benchmark says the Valley’s rule against backing rivals is getting harder to keep.",
  "key_points": [
    "Benchmark acknowledges AI is eroding venture pact against backing rivals.",
    "Partners admit rule of not backing competing companies is under strain.",
    "Conflicts rise due to rapid growth of AI startups and decreasing software costs."
  ],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}