Grammarly lands $1 billion to grow AI productivity platform
Grammarly, the AI-powered writing assistant known for helping millions of users improve their written communication, has secured a $1 billion capital commitment from General Catalyst. This substantial funding, announced recently, is part of an alternative financing strategy that offers a crucial lifeline to late-stage startups navigating today’s tighter capital markets.
The 14-year-old company plans to deploy the funds primarily for expanding its sales and marketing efforts. This infusion will free up Grammarly’s existing capital, enabling the company to pursue strategic acquisitions as it evolves into a broader AI productivity platform.
A Different Kind of Deal
What sets this funding apart from traditional venture capital is its structure. General Catalyst will not receive equity in Grammarly. Instead, the investment will be repaid over time through a fixed, capped percentage of revenue generated using the funds. This structure, often referred to as revenue-based financing, allows Grammarly to avoid dilution and maintain its existing valuation metrics.
The funds come from General Catalyst’s Customer Value Fund (CVF), a specialized pool that targets companies with strong, recurring revenue. CVF provides nondilutive growth capital secured against those predictable revenue streams—a model particularly attractive in the current market, where many startup valuations have taken a hit.
Grammarly was last valued at $13 billion in 2021 during the height of the zero interest-rate era. Although its current valuation is reportedly much lower, the new financing avoids the need for a valuation reset, preserving long-term shareholder value.
Strategic Shifts and Acquisitions
This move comes at a time of significant transformation for Grammarly. In December, the company acquired productivity platform Coda and appointed its CEO, Shishir Mehrotra, to lead the combined organization. The acquisition signals Grammarly’s ambitions to expand beyond writing assistance into the broader AI productivity space.
With over $700 million in annual revenue and a user base spanning individuals, teams, and enterprises, Grammarly is well-positioned to capitalize on the AI wave. The new capital will help amplify its market presence while providing the flexibility to acquire complementary technologies and talent.
General Catalyst’s Growing Influence
General Catalyst’s CVF has quietly become a powerful force in late-stage startup financing. With nearly 50 companies in its portfolio—including insurtech Lemonade and telehealth provider Ro—CVF offers an attractive alternative to traditional funding. It also operates independently from the firm’s main venture fund, which recently raised $8 billion.
Hemant Taneja, CEO of General Catalyst, and Pranav Singhvi, CVF’s co-head, have emphasized the importance of flexible, founder-aligned capital structures, particularly in a market where founders are increasingly reluctant to accept down rounds or diluted stakes.
What’s Next?
With strong recurring revenue, a growing product suite, and now a major war chest of nondilutive capital, Grammarly is doubling down on growth at a time when many startups are focused on survival.
The General Catalyst deal represents a growing trend in the startup ecosystem—one where creative capital structures provide a bridge between profitability and long-term innovation.
