Grammarly Receives $1 Billion in Nondilutive Investment from General Catalyst

Grammarly, the writing assistant company founded 14 years ago, has secured a $1 billion funding commitment from General Catalyst. The capital will support Grammarly’s sales and marketing initiatives while preserving its existing funds for potential strategic acquisitions.

Unlike conventional venture capital deals, this investment doesn’t involve General Catalyst acquiring equity in Grammarly. Instead, Grammarly will repay the capital based on a fixed, capped percentage of revenue generated through the use of those funds.

The financing comes from General Catalyst’s Customer Value Fund (CVF)—a fund tailored for late-stage startups with steady revenue. This model offers companies like Grammarly a way to access growth capital without giving up ownership or altering their valuation.

This nondilutive approach is particularly appealing in today’s market climate. Grammarly was last valued at $13 billion in 2021 during a period of near-zero interest rates. However, sources familiar with the matter say that its current valuation is significantly lower, though Grammarly has not commented publicly.

In a notable strategic move late last year, Grammarly acquired the productivity platform Coda and named Coda’s CEO, Shishir Mehrotra, as Grammarly’s new chief executive. Since then, the company has been transitioning into a broader AI-powered productivity suite, and it currently brings in more than $700 million in annual revenue.

General Catalyst’s CVF has financed nearly 50 companies to date, including Lemonade and Ro. It operates independently from the firm’s recent $8 billion fundraise, with its own set of limited partners. Last fall, General Catalyst’s Hemant Taneja and Pranav Singhvi, co-leads of CVF, explained the fund’s revenue-backed funding approach in an interview with TechCrunch.

Read the original article on: TechCrunch

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