Grammarly has locked in a $1 billion financing deal from General Catalyst, but instead of handing over equity, the writing assistant company will repay the amount through a capped share of revenue generated using the funds.
This arrangement lets Grammarly scale aggressively without compromising its valuation or control.
The investment comes from General Catalyst’s Customer Value Fund (CVF), a fund structured specifically for late-stage startups that already have stable revenue. CVF doesn’t behave like a typical venture capital arm, it doesn’t buy equity.
It issues non-dilutive capital, secured against a company’s predictable income streams. For Grammarly, that’s an edge as it scales through the post-ZIRP (Zero Interest Rate Policy) market.
Grammarly, founded 14 years ago, generates more than $700 million annually and claims 40 million daily users. But the firm is changing direction, beyond grammar checks, toward a full-scale AI productivity suite.
The December 2024 acquisition of Coda, a productivity startup, marked a clear pivot. Shishir Mehrotra, Coda’s former CEO, now leads Grammarly’s next phase.
“Grammarly is evolving into an AI-powered productivity company,” Mehrotra said after the acquisition. The company is integrating third-party tools and moving into enterprise workflows, a strategy that demands aggressive go-to-market expansion and targeted acquisitions, both areas the new funding will support.
Again, the deal does not affect Grammarly’s valuation. Although it hit a $13 billion valuation during the height of the zero-interest boom in 2021, its current market value remains under wraps. An insider told us that today’s valuation is “significantly lower,” but didn’t offer figures.
Regardless, the nondilutive nature of the CVF deal ensures Grammarly doesn’t have to renegotiate that number down.
General Catalyst, through CVF, has backed close to 50 firms, including insurtech startup Lemonade and telehealth company Ro. The fund operates independently from the firm’s recent $8 billion raise and has its own limited partners.
In a past interview, CVF co-head Pranav Singhvi said the model is designed for “companies that are ready to grow, not experiment.”
The absence of equity transfer in the Grammarly deal is deliberate. “It’s capital that’s deeply aligned with business growth,” Singhvi explained.
Per TechCrunch, Grammarly didn’t respond to requests for comment on future IPO plans, though Mehrotra has hinted at it before. There’s no timeline yet, but if the firm continues scaling at this pace, a public offering could follow sooner rather than later.
