Grammarly, the AI Writing Guru, Bags a $1Billion Non-Equity Investment from General Catalyst's Customer Value Fund

Adding new chapters to its impressive commercial journey, Grammarly, the AI-powered writing assistance tool, has netted a humongous $1 billion commitment from General Catalyst. This 14-year-old startup plans to inject the new funds into turbocharging its sales and marketing machinery as well as make strategic buys, enabling the firm to effectively manage its existing capital.

Notably, unlike traditional venture rounds, this investment does not offer General Catalyst an equity stake in Grammarly. Instead, the company intends to repay the capital along with a fixed, capped percentage of revenue generated from using these funds.

The fresh injection of capital comes from General Catalyst’s innovative Customer Value Fund (CVF), offering a boon to validated, later-stage startups seeking to expand their businesses. The CVF’s strategy doesn’t just lend capital but ensures it’s secured by a company’s recurrent revenue.

Grammarly’s recent stride includes acquiring productivity startup Coda last December and upgrading its operations with the appointment of Coda’s CEO, Shishir Mehrotra. The evolving company, attaining prowess as an AI productivity tool, boasts an annual revenue exceeding $700 million.

CVF’s record brags about its previously funded nearly 50 companies, counting in names like insurtech firm Lemonade and telehealth service Ro. Interestingly, CVF has distinct limited partners and was independent of General Catalyst’s recent $8 billion capital rally.

The vision and strategy behind this specialized funding were shared in detail by Hemant Taneja, high-profile-head of General Catalyst, and Pranav Singhvi, co-head of CVF, kindling insights on financial innovation in the startup ecosystem.