Grammarly has landed a one billion dollar capital commitment from General Catalyst, a move intended to bolster the company’s sales and marketing initiatives. This injection of funds allows Grammarly to redirect its own reserves toward future acquisitions, as the company continues its expansion in the competitive productivity tech sector.
Unlike most venture investments, General Catalyst will not take ownership in the San Francisco based firm. Instead, Grammarly has agreed to reimburse the sum along with a set percentage of revenue generated through the use of these resources, a structure that avoids diluting Grammarly’s equity or impacting its overall valuation.
Strategic Funding and Shifting Valuations
The funding comes from General Catalyst’s Customer Value Fund, which specializes in supplying capital to companies with steady, recurring revenue. This fund operates by lending to late stage startups and secures its investment against the predictable income these firms produce, allowing businesses like Grammarly to grow without relinquishing ownership stakes.
Grammarly’s last public valuation, set in 2021 at thirteen billion dollars during the peak of the zero interest rate era, is reportedly lower in today’s market conditions, according to a person familiar with the company. Leadership at Grammarly has yet to address questions around its current valuation or the implications of the new financial structure.
Recent months have seen the company expand its ambitions beyond its original writing assistant platform. In December, Grammarly acquired productivity startup Coda and installed former Coda chief Shishir Mehrotra at the helm, signaling a broader pivot toward artificial intelligence based productivity tools.
Annual revenue for Grammarly has climbed above seven hundred million dollars, reflecting strong demand for its suite of digital offerings. The Customer Value Fund, now financing nearly fifty businesses, has previously supported other rapidly growing firms including Lemonade in the insurance sector and telehealth provider Ro.
General Catalyst’s CVF maintains a separate roster of limited partners and was not part of the broader firm’s recent multi billion dollar capital raise. The fund’s leaders have previously discussed their novel lending approach, emphasizing the benefits for mature startups seeking to accelerate growth without compromising existing shareholder value through non-dilutive growth financing.
