Writing assistant tool Grammarly secured $1 billion in non-dilutive capital from General Catalyst.
Unlike a standard venture round, General Catalyst will not receive an equity stake in the company in exchange for its investment. Grammarly will instead repay the capital plus a defined, capped proportion of the revenue generated from the use of General Catalyst’s funds.
The start-up plans to use the capital for sales and marketing expenses, as well as strategic acquisitions. The investment aims to enhance Grammarly’s AI capabilities and develop it into a comprehensive productivity platform.
It also intends to offer third-party solutions on its platform, leveraging access to its 40 million daily visitors.
The investment comes from General Catalyst’s Customer Value Fund (CVF), a capital pool that supports late-stage entrepreneurs with reliable revenue streams in deploying new funds for company growth. CVF’s alternative financing model essentially "lends" capital against a company’s recurring revenue. This is one of Grammarly’s largest investments to date and has the potential to accelerate its growth.
Grammarly Financials
Grammarly, founded in 2009, generates over $700 million in annual revenue and is profitable. In December, Grammarly appointed Shishir Mehrotra, the former CEO of the acquired productivity platform Coda, as its new CEO, signaling a push toward more AI-powered office applications.
This type of funding benefits Grammarly because it is non-dilutive and does not reset the company’s valuation. The start-up was valued at $13 billion in 2021, at the peak of the zero interest-rate policy (ZIRP) era. However, an investor, who requested anonymity, stated that the company’s current market valuation is significantly lower.
The San Francisco-based start-up has raised over $550 million in venture capital, according to PitchBook data. It was last valued at $13 billion in 2021.
General Catalyst’s Customer Value Fund operates independently of the firm’s primary venture funds and has separate limited partners. It is not included in the firm’s recently announced $8 billion financing.
This approach is part of the tech investor’s strategic growth, led by CEO Hemant Taneja, as it seeks to move beyond the traditional venture capital model by developing innovative funding structures.
The Customer Value Fund has invested in approximately 50 companies, including Lemonade and Fivetran, as it focuses on growth initiatives and a more predictable path to returns.
