Grammarly, the 14-year-old writing assistant startup, has received a $1 billion commitment from General Catalyst to bolster its sales and marketing initiatives and facilitate strategic acquisitions. The funding will not dilute Grammarly’s equity.
General Catalyst’s investment originates from its Customer Value Fund (CVF), which supports late-stage startups with reliable revenue streams. The CVF provides capital secured by a company’s recurring revenue, acting as a form of lending.
This financing structure allows companies such as Grammarly to avoid equity dilution and valuation resets. Grammarly’s valuation reached $13 billion in 2021. However, an anonymous investor notes a significantly lower valuation in the current market.
Grammarly will repay the capital along with a fixed, capped percentage of revenue generated from the use of General Catalyst’s funds.
In December, Grammarly acquired productivity startup Coda and appointed its CEO, Shishir Mehrotra, to lead Grammarly. The acquisition reflects Grammarly’s shift toward becoming an AI productivity tool, which now has annual revenue exceeding $700 million.
General Catalyst’s Customer Value Fund has invested in nearly 50 companies, including insurtech Lemonade and telehealth platform Ro. CVF operates with separate limited partners and was not part of the firm’s recent $8 billion capital raise.
