Grammarly has won a massive $1 billion funding from a typical catalyst. The agreement allows writing assistant companies to grow AI products, expand into new products, and enhance marketing.
The investment announced Thursday is comprised through the general Catalyst customer value fund. In other words, Grammarly does not abandon its stock, but instead repays some of the revenue generated from the capital used to acquire new customers.
“Grammarly will use market investments from General Catalyst’s Customer Value Fund (CVF) to expand sales and marketing and use it for strategic acquisitions,” the startup said in a blog post.
This is one of the biggest moves from CVF, set up to help later staged companies scale without resorting to traditional funding. Because of grammar, money can accelerate everything from product development to strategic acquisitions. With over 40 million users per day, the company is looking at its path from one use writing assistant to evolve into a wider productivity platform that could potentially host third-party tools.
“We are going through a huge transformation, from a single purpose agent to an agent platform,” said Shishir Mehrotra, CEO of Grammar in an interview. “We felt it was extremely important to make big bets on product development, M&A and growth strategies.”
After leading the productivity platform CODA, Mehrotra joined as CEO in December, leading grammar to the next stage. Although there is no immediate IPO plan, he revealed that the company has an open market on radar.
“I’m now focused on making sure we’re innovating with new products and growing as quickly as possible. But when we’re ready, we’ll be exposed,” he said.
Founded in 2009, Grammarly is already profitable and generates over $700 million in annual revenue. According to Pitchbook, the company raised more than $550 million from venture capital, and was ultimately valued at $13 billion in 2021.
For general catalysts, this approach illustrates a change in how it supports growth-stage companies. CVF investments focus on revenue outcomes as they are related to revenue instead of traditional VC returns. This essentially provides proven companies like Grammarly with the opportunity to scale faster without dilution of shareholders.
“Companies like Grammarly have machines that can basically invest dollars in sales and marketing and generate very consistent returns,” says Pranav Singhvi, managing director at General Catalyst. “With this wave of AI, those customers could land over 40 million by giving grammar firepower to actually go and invest in.”
CVF already supports nearly 50 companies, including Lemonade and Fivetlan. It operates separately from the main Catalyst funding in general, and has recently raised $8 billion.
This type of structure can become more common as late-stage companies are looking for non-traditional ways to grow. It is particularly difficult to engulf in markets where IPO windows are tight and stock dilution is difficult. For grammar, it’s a billion dollar vote of trust and a push to move quickly into the AI future in that building.
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