Grammarly, the well-known writing assistant platform, has received a significant funding boost—US$1 billion—from investment firm General Catalyst. But this isn’t your typical funding deal. Instead of giving away a stake in the business, Grammarly will repay the money based on the revenue it earns with the help of these funds. This type of agreement means the company keeps complete control and doesn’t reduce the ownership of its current shareholders.
This funding comes when Grammarly expands its reach and moves deeper into the AI productivity space. If you’ve used Grammarly, you’ll know how it helps you write clearer and more effectively. With this new money, the company plans to focus more on sales and marketing and may explore new strategic acquisitions.
What makes this deal different?
Most startups raise money by offering part of their business to investors. But Grammarly chose a different path. This new investment comes from General Catalyst’s Customer Value Fund (CVF), which provides an alternative way for successful companies to raise money without giving up any equity.
Instead of owning part of Grammarly, General Catalyst will get a fixed percentage of revenue that Grammarly earns using capital. This deal, nondilutive financing, is useful for companies with a steady income. It also helps them avoid lowering their value in the market, something many startups face when they raise traditional venture capital in today’s financial climate.
General Catalyst launched the CVF to support companies doing well but needing extra cash to grow. The fund supports firms with strong recurring revenue and a clear path to future income. Grammarly earns over US$700 million a year, making it a perfect fit for this type of support.
A move toward AI productivity
Grammarly has existed for 14 years, and many know it for its grammar-checking tools. However, after buying productivity software company Coda in December, Grammarly started to shift its focus. Coda’s CEO, Shishir Mehrotra, is now leading Grammarly as it works on expanding its AI tools.
This move shows Grammarly’s desire to become more than just a writing helper. With AI being the focus of many tech companies, Grammarly is looking to become a full productivity platform. The Coda deal gave it the tools and leadership needed to make that leap.
Despite not being valued as highly as it once was—the company had a US$13 billion valuation in 2021—Grammarly remains a strong player in the market. The nondilutive funding means it doesn’t have to worry about today’s lower valuations when raising money.
General Catalyst’s growing influence
General Catalyst’s Customer Value Fund has already backed nearly 50 companies, including Lemonade, a digital insurance firm, and Ro, a telehealth platform. This shows that the fund is a reliable option for late-stage startups that want to grow without losing equity.
The CVF also has limited partners, separate from General Catalyst’s main US$8 billion fund. This allows the CVF to focus solely on this specialised type of financing. Last year, General Catalyst’s Hemant Taneja and Pranav Singhvi, who co-leads CVF, discussed this unique funding approach in detail during a discussion with TechCrunch.
Grammarly didn’t comment directly on the deal, but it’s clear that this funding marks a big step forward. With solid revenue, a growing AI focus, and now US$1 billion in fresh capital, Grammarly is setting itself up for its next growth phase—without giving up any control.
