Grammarly has secured a $1 billion commitment from General Catalyst. The 14-year-old writing assistant startup will use the new funds for its sales and marketing efforts, freeing up existing capital to make strategic acquisitions.<\/p>\n
Unlike a traditional venture round, General Catalyst will not receive an equity stake in the company in return for the investment. Instead, Grammarly will repay the capital along with a fixed, capped percentage of revenue it generates from the use of General Catalyst\u2019s funds.<\/p>\n
The investment comes from General Catalyst\u2019s Customer Value Fund (CVF), a capital pool that helps late-stage startups with predictable revenue streams deploy new funding specifically to growing their businesses. CVF\u2019s alternative financing strategy essentially \u201clends\u201d capital that is secured by a company\u2019s recurring revenue. \u00a0<\/p>\n
For companies like Grammarly, this form of financing is advantageous because it\u2019s nondilutive and does not reset the company\u2019s valuation. Grammarly was valued at $13 billion in 2021<\/a>, during the peak of the ZIRP (zero interest-rate policy) era. However, the company\u2019s valuation in today\u2019s market is significantly lower, according to an investor in the company who asked to remain anonymous.<\/p>\n Grammarly didn\u2019t immediately respond to a request for comment.<\/p>\n In December, Grammarly acquired productivity startup Coda<\/a> and appointed its CEO, Shishir Mehrotra, to lead Grammarly. The company, which is evolving into an AI productivity tool following the acquisition, has annual revenue of over $700 million<\/a>.<\/p>\n General Catalyst\u2019s Customer Value Fund has provided funding to nearly 50 companies<\/a>, including insurtech Lemonade and telehealth platform Ro. CVF maintains its own distinct limited partners and was not included in the firm\u2019s recent $8 billion capital raise. <\/p>\n