Grammarly secures $1 billion in nondilutive funding from General Catalyst

Grammarly has received a $1 billion commitment from General Catalyst. The 16-year-old writing assistant startup plans to utilize the new funds for sales and marketing initiatives, allowing existing capital to be allocated towards strategic acquisitions.

Unlike a typical venture round, General Catalyst will not acquire an equity stake in Grammarly in exchange for the investment. Instead, Grammarly will repay the capital along with a fixed, capped percentage of revenue generated from General Catalyst’s funds.

This investment originates from General Catalyst’s Customer Value Fund (CVF), a capital pool designed to assist late-stage startups with consistent revenue streams in utilizing new funding to expand their businesses. CVF’s unique financing approach involves providing capital secured by a company’s recurring revenue.

For companies like Grammarly, this type of financing is beneficial as it does not dilute ownership and does not impact the company’s valuation. Although Grammarly was valued at $13 billion in 2021 during the ZIRP era, its current valuation in today’s market is notably lower, as indicated by an investor who chose to remain anonymous.

In December, Grammarly acquired productivity startup Coda and appointed its CEO, Shishir Mehrotra, to lead Grammarly. With an annual revenue exceeding $700 million, the company is transitioning into an AI productivity tool post-acquisition.

General Catalyst’s Customer Value Fund has extended funding to nearly 50 companies, including Lemonade and Ro. CVF operates with its own distinct limited partners and was not part of the firm’s recent $8 billion capital raise.

Tech and VC heavyweights, such as General Catalyst CEO Hemant Taneja and CVF co-head Pranav Singhvi, discussed the group’s specialized financing strategy in more detail with TechCrunch last fall.