Venture capital’s long-held understanding—that firms don’t invest in companies competing directly against each other—is facing a severe test in the age of AI. At Disrupt 2026, Benchmark partners acknowledged out loud what many in the industry have been whispering: the surge of AI startups is stretching that rule beyond recognition.
The Uneasy Shift in VC Loyalty
Historically, VC firms avoided backing rivals, especially in overlapping product spaces. But the lineup of players in AI is complicating things fast. OpenAI and Anthropic, for instance, now share some of the same high-profile investors. Similarly, a recent clash between two startups called Factory and Cognition ended with Factory firing a board observer and move to alleged unethical conduct—while both swing for a similar AI-driven software development goal. One investor in both companies weighed in, further muddying relational waters.
Benchmark, long championing founder loyalty and early-stage confidentiality, says these strain points are no longer edge cases. Relying on venture norms won’t always hold as startups evolve rapidly, pivot in unexpected directions, and compete over expanding “surface area.” Conflicts between portfolio companies are more likely now.
AI & Ambition Are Redrawing Lines
Benchmark’s Eric Vishria assumed there’s no avoiding overlap when companies mature—after all, what starts as distinct often converges. Early-stage exclusivity rules are still seen as vital, but as time goes on the boundaries blur. AI’s rapid pace means companies are eager to go beyond their original scope.
Partner Chetan Puttagunta noted that with lower technical barriers and software development becoming cheaper, ambitious founders are staking out broader claim to market territory—opening up clashes both intended and accidental. Peter Fenton described this as one of the firm’s toughest challenges. For him, it’s about maintaining transparency so that when conflicts arise, none of the founders are surprised or feel betrayed.
Benchmark isn’t walking away from the old rule—it’s reframing it. The firm still values loyalty, confidentiality, and founder-support. But they also acknowledge that conflicts are no longer rare anomalies but inherent risks in AI backing.
What this means going forward: VC contracts, board observer roles, and investment diligence may shift. Founders will want clearer promises around competition, and investors will need stronger guardrails to handle spillovers when ambitions pull companies into overlapping territory.
Benchmark’s frank admission may shift norms in VC cold rooms. It underscores how AI is not just reshuffling product roadmaps—it’s reordering investment ethics. Founders, investors, and LPs will soon face hard choices about what “rival” really means.
