AI coding agent startup Factory has raised $200 million in a new funding round, more than tripling its valuation to $5 billion, as demand for AI-assisted software development continues to attract significant investment. The San Francisco, California-based company announced the funding on Tuesday.
Factory develops AI agents for enterprise engineering teams. Its platform allows businesses to use AI agents to build, test and maintain software. The company was founded in 2023 by Matan Grinberg and Eno Reyes and competes with AI coding platforms including Cognition and Cursor.
The latest funding round was backed by Blackstone, Khosla Ventures, Sequoia Capital, Insight Partners, Evantic Capital and Sound Ventures, among others. The new investment marks a significant increase in Factory’s valuation compared with its previous funding round.
Factory had raised $150 million at a $1.5 billion valuation in April. The latest $200 million funding round has now taken the company’s valuation to $5 billion.
The funding comes as AI-assisted coding has become one of the most widely adopted applications of generative AI. Businesses are increasingly using such tools to speed up software development and improve workforce productivity, while investors have committed billions of dollars to companies operating in the sector.
Factory said the latest investment comes as large enterprises move beyond using individual AI coding agents toward broader systems that can support software development across an organisation.
“Across the world’s largest enterprises, we are seeing a move from individual coding agents to software factories that serve as the core foundation from which an entire software company operates,” said Matan Grinberg, co-founder and CEO of Factory.
The company is positioning its platform around this shift toward what it describes as software factories. Its technology is designed to support enterprises in building, testing and maintaining software through AI agents rather than limiting AI use to individual coding tasks.
Factory’s latest fundraise also comes as companies such as Coinbase and Block reshape their workforces around AI. These companies have cited improvements in productivity as they incorporate artificial intelligence into their operations.
The growing adoption of AI in software development has also coincided with concerns about the speed at which the technology is advancing. While companies and investors continue to put money into AI development, several top industry executives have called for slower advances amid concerns that the technology could be misused.
Factory’s funding round adds to a series of large investments in AI coding and software development companies. Earlier this month, Cognition raised $2 billion at a $48 billion valuation. Cognition is among the AI coding platforms competing in the same broader market as Factory.
The latest investment gives Factory a valuation more than three times its $1.5 billion valuation from April, when it raised $150 million. The company’s new $5 billion valuation follows the $200 million funding round backed by several major investment firms.
The development comes as businesses continue adopting AI-assisted coding tools while investors increase their focus on companies developing AI agents for software engineering. Factory’s platform is aimed at enterprise engineering teams and supports software development activities including building, testing and maintaining software.
With the latest funding, Factory has moved from a $1.5 billion valuation in April to $5 billion following its $200 million round. The company was founded in 2023 and is led by co-founder and CEO Matan Grinberg, who said enterprises are increasingly moving toward broader AI-driven software development systems.
The funding highlights the continued investor interest in AI-assisted coding as businesses seek to use generative AI to support software development and workforce productivity. At the same time, the rapid development of AI continues to generate discussion among industry executives over the pace of technological progress and the potential risks associated with misuse.
