AI Coding Startup Factory Secures $150M Funding at $1.5B Valuation, Targeting Lucrative Generative AI Coding Market

It has been more than three years since generative AI first emerged into the mainstream tech ecosystem, and AI-assisted coding still stands as the technology’s most widely adopted and profitably viable use case by a significant margin.

While a roster of companies — including Anthropic, developer of Claude Code, along with competing platforms Cursor and Cognition — are already battling for market leadership in this space, investors maintain there is still room for at least one additional major player to succeed.

That new contender formalized its growth funding this week: On Wednesday, Factory, a startup building purpose-built AI coding agents for enterprise engineering teams, announced it closed a $150 million funding round that values the company at $1.5 billion. The round was led by Khosla Ventures, with participation from Sequoia Capital, Insight Partners, and Blackstone. Keith Rabois, managing director at Khosla Ventures, has joined the startup’s board of directors as part of the deal.

Factory founder Matan Grinberg told The Wall Street Journal that the company’s core competitive advantage is its built-in flexibility to switch between different large foundation models, including Anthropic’s Claude and the large language models from Chinese AI startup DeepSeek. It should be noted that competing startups such as Cursor also do not tie their code generation tools to a single proprietary model.

Factory already counts engineering teams from major global firms among its customer base, including Morgan Stanley, Ernst & Young, and Palo Alto Networks.

The startup was founded in 2023, following an unlikely origin story: At the time, Grinberg was a PhD student in physics at UC Berkeley when he sent a cold outreach email to Sequoia Capital partner Shaun Maguire. The pair connected over shared academic interests, as Maguire’s Caltech PhD is in the same physics subfield Grinberg was researching.

Maguire ultimately convinced Grinberg to leave his PhD program early to launch Factory full-time, with Sequoia backing the startup during its initial seed stage.