Grammarly secured a $1 billion commitment from General Catalyst. The 14-year-old writing assistant startup uses new funds for sales and marketing efforts to free up existing capital and make strategic acquisitions.
Unlike traditional venture rounds, General Catalyst does not receive shares in the company in return for investment. Instead, Grammarly repays capital along with the percentage return of fixed caps that it generates from the general use of Catalyst funds.
This investment comes from General Catalyst’s Customer Value Fund (CVF). It deploys new funds to capital pools that support late-stage startups with predictable revenue streams, particularly business growth. CVF’s alternative financing strategies essentially “lending” capital, which is protected by the company’s repeated revenues.
For companies like Grammarly, this form of funding is advantageous as it is undiluted and does not reset the company’s valuation. Grammarly was valued at $13 billion in 2021 at its peak during the Zirp era. However, the company’s valuation in the market today is significantly lower, according to investors who wanted it to remain anonymous.
Grammarly did not immediately respond to requests for comment.
In December, Grammarly won the productivity startup CODA and appointed CEO Shishir Mehrotra to lead Grammarly. The company has evolved into an AI productivity tool since the acquisition, with annual revenues exceeding $700 million.
General Catalyst’s Customer Value Fund funds nearly 50 companies, including Insurtech Lemonade and Telehealth Platform RO. CVF maintains its own distinct limited partner, not included in the company’s recent $8 billion salary increase.
CVF co-heads Honcho Hemant Taneja and Pranav Singhvi discussed the group’s specialist fundraising strategy for longer with TechCrunch last fall.
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