Factory hits $1.5B valuation to develop AI software for businesses

Three years after the introduction of AI output, AI-assisted writing remains a popular and highly profitable form of technology.

While several companies – including Anthropic, developer Claude Code, as well as Cursor and Cognition – are already vying for dominance, investors believe there is room for another player to play.

On Wednesday, Factory, which is developing AI to help business teams, announced that it raised $150 million at a cost of $1.5 billion. The round was led by Khosla Ventures, with Sequoia Capital, Insight Partners, and Blackstone. Keith Rabois, managing director at Khosla Ventures, joined the startup team.

Factory founder Matan Grinberg told a Wall Street Journal that the main differentiator of the company is the ability to switch between different types of foundations, such as Anthropic’s Claude or the Chinese AI startup DeepSeek. However, developers like Cursor also don’t rely on a single model to generate code.

The factory’s customers include engineering teams at Morgan Stanley, Ernst & Young, and Palo Alto Networks.

The startup was founded in 2023 after Grinberg, who was a PhD student at UC Berkeley, a colleague of Sequoia who sent Shaun Maguire emails. The two agreed on academic matters. (Maguire’s PhD from Caltech is in the same area Grinberg studies.)

Maguire convinced Grinberg to quit his job and start Factory, with Sequoia supporting the start-up in the seed division.