Grammarly Receives $1 Billion Commitment from General Catalyst
Grammarly, the popular writing assistant startup, has recently secured a $1 billion commitment from General Catalyst. This investment will be used to boost Grammarly’s sales and marketing efforts, allowing the company to focus on strategic acquisitions with its existing capital.
Unlike traditional venture rounds, General Catalyst will not receive 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 the use of General Catalyst’s funds.
The investment stems from General Catalyst’s Customer Value Fund (CVF), which assists late-stage startups with predictable revenue streams in expanding their businesses. This alternative financing strategy involves lending capital secured by a company’s recurring revenue.
For Grammarly, this form of financing is advantageous as it is nondilutive and does not impact the company’s valuation. Although Grammarly was valued at $13 billion in 2021, its current valuation in the market is reportedly lower according to an anonymous investor.
In December, Grammarly made headlines with its acquisition of productivity startup Coda and the appointment of its CEO, Shishir Mehrotra, to lead the company. With an annual revenue exceeding $700 million, Grammarly is transitioning into an AI productivity tool post-acquisition.
The Customer Value Fund by General Catalyst has previously supported close to 50 companies, including Lemonade and Ro. This fund operates with its own set of limited partners and was not part of the firm’s recent $8 billion capital raise.
Hemant Taneja, the head of General Catalyst, and Pranav Singhvi, co-head of CVF, elaborated on the group’s specialized financing strategy in an interview with JS last fall.
