Factory raises $150 million at $1.5 billion valuation

On Wednesday, the enterprise AI coding startup Factory announced that it has raised $150 million in a funding round, valuing the company at $1.5 billion. Factory specializes in developing AI agents, which are defined as AI systems capable of performing tasks autonomously, specifically tailored for enterprise engineering teams.

The funding round was led by Khosla Ventures. The list of investors participating in the round includes:

• Sequoia Capital
• Insight Partners
• Blackstone

Following the close of the funding round, Keith Rabois, who serves as a managing director at Khosla Ventures, has joined Factory’s board.

The investment comes at a time when AI-assisted coding remains a highly active and lucrative sector. While multiple companies—including Anthropic and Cursor—are already competing for dominance in this space, investors continue to believe there is sufficient room for additional enterprise-focused players.

In an interview with the Wall Street Journal, Factory founder Matan Grinberg explained that the company’s key differentiator is its ability to switch between different foundation models. Foundation models are defined as large-scale AI models used as the basis for applications. This capability allows engineering teams to switch between different models, such as Anthropic’s Claude or models developed by the Chinese AI startup DeepSeek. However, Factory is not the only player employing this multi-model strategy; other startups in the space, such as Cursor, also do not rely on a single model to generate code.

Factory has already secured adoption from several major corporate engineering teams. The startup’s current customer base includes engineering departments at Morgan Stanley, Ernst & Young, and Palo Alto Networks.

The origins of Factory date back to 2023, when the startup was founded following an unexpected connection between Grinberg and early backers. At the time, Grinberg was a PhD student at UC Berkeley when he decided to cold-email Sequoia partner Shaun Maguire. The two quickly bonded over their mutual academic interests; Maguire’s own PhD from Caltech was in the exact same area of physics that Grinberg was studying. This connection led Maguire to convince Grinberg to drop out of his doctoral program to launch Factory, with Sequoia Capital subsequently backing the startup at the seed stage.

Why it matters

Factory’s $1.5 billion valuation underscores the continued investor appetite for AI-assisted coding startups, even in a market that is becoming increasingly crowded.