Grammarly Secures $1B in Funding Boost
Grammarly’s $1B Non-Dilutive Deal With General Catalyst
The AI-powered writing assistant Grammarly has landed a massive $1 billion funding commitment from venture firm General Catalyst. The 14-year-old company plans to direct these new funds toward scaling its sales and marketing operations, while preserving existing capital for strategic acquisitions.
Alternative Financing Structure
This isn’t a traditional equity investment. General Catalyst’s Customer Value Fund (CVF) will receive repayments from Grammarly tied to revenue generated by the capital rather than taking an ownership stake. The arrangement features:
- No equity dilution for existing shareholders
- Fixed, capped percentage of revenue repayment
- Capital secured by Grammarly’s recurring revenue streams
Grammarly’s Current Market Position
While Grammarly achieved a $13 billion valuation in 2021 during the peak of zero interest-rate policies, sources indicate its current valuation has adjusted downward in today’s market conditions. The company boasts annual revenues exceeding $700 million and is expanding its capabilities following the December acquisition of productivity startup Coda.
About General Catalyst’s CVF
The investment comes from General Catalyst’s specialized Customer Value Fund, which has deployed similar revenue-based financing to nearly 50 companies including:
- Insurtech platform Lemonade
- Telehealth provider Ro
CVF operates with its own LPs and was separate from General Catalyst’s recent $8 billion fundraise.
Grammarly’s AI Evolution
Grammarly is transforming from a writing tool into a comprehensive AI productivity platform, evidenced by its acquisition of Coda and appointment of Coda CEO Shishir Mehrotra as Grammarly’s leader. The fresh funding will accelerate this strategic shift while maintaining the company’s financial flexibility.
General Catalyst leaders Hemant Taneja and Pranav Singhvi have previously discussed their firm’s innovative financing approach that allows mature startups like Grammarly to grow without valuation resets or founder dilution.