Grammarly has secured a hefty funding from General Catalyst for sales and marketing purposes.
The writing assistant startup will be using the existing capital to make strategic acquisitions.
Unlike tradition scenario, Grammarly will not be giving up their ownership in return to the $1 billion investment.
Instead, it will repay the capital alongside a fixed percentage of revenue it would potentially generate from the General Catalyst's funding.
How does the funding works with a venture capital company?
The investment comes from General Catalyst's Customer Value Fund (CVF), a capital pool that aids late-stage startups with predictable revenue streams deploy new funding specifically to growing their businesses.
CVF's financial strategy aims to "lends" capital that can be secured by a company's recurring revenue.
This move is quite beneficial to Grammarly, as it is non-dilutive and does not affect the company's worth.
In 2021, the software tool was valued at $13 billion, during the peak period of the zero interest-rate policy (ZIRP).
However, amid the never ending rise of AI, the company's valuation has taken a major hit.
In December 2024, Grammarly acquired productivity startup Coda and appointed it's CEO, Shishir Mehrotra, to lead the writing assistance.
The company, which is also evolving into an AI productivity tool since the purchase, has seen annual revenue of over $700 million.
General Catalyst's Customer Value Fund has also provided investment to nearly 5 companies, both in teach and health industries.
