General Catalyst has committed $1 billion to Grammarly, to which the latter will use to free up current money for strategic acquisitions, and use the new funds for its marketing and sales initiatives.
In contrast to a conventional venture round, General Catalyst will not be compensated with an ownership part in the business. Rather, Grammarly will pay back the capital plus a predetermined, capped portion of the money it makes from using General Catalyst's money.
General Catalyst's Customer Value Fund (CVF), a capital pool that assists late-stage entrepreneurs with steady revenue streams in allocating new funds exclusively for company expansion, is the source of the investment. In essence, CVF's alternative financing approach "lends" money that is backed by a business's steady income.
This type of funding is beneficial for businesses like Grammarly since it is nondilutive and does not alter the company's valuation. Grammarly's 2021 valuation, at the height of the zero interest-rate policy (ZIRP) era, was $13 billion.
Shishir Mehrotra, the CEO of productivity startup Coda, was hired by Grammarly to run the company after it purchased it in December.
Following the acquisition, the business, which generates over $700 million in revenue annually, is developing into an AI productivity tool.
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Nearly 50 businesses have received funding from General Catalyst's Customer Value Fund, including the healthcare platform Ro and the insurtech Lemonade. CVF did not participate in the company's most recent $8 billion capital round and still has its own unique limited partners.