Key Takeaways
- • Grammarly has secured a $1 billion commitment from General Catalyst's Customer Value Fund (CVF), structured as nondilutive financing with no equity stake issued to the investor.
- • Repayment consists of the principal plus a fixed, capped percentage of revenue generated from the deployed funds, according to TechCrunch.
- • Grammarly will direct the capital toward sales and marketing, freeing existing balance-sheet capital for strategic acquisitions.
- • The structure avoids a valuation reset; Grammarly was valued at $13 billion in 2021, and an anonymous investor says its current valuation is significantly lower.
- • Grammarly, with annual revenue above $700 million, acquired Coda in December and appointed CEO Shishir Mehrotra to lead the company as it evolves into an AI productivity tool.
Summary
Grammarly has secured a $1 billion commitment from General Catalyst, according to TechCrunch reporter Marina Temkin. The 16-year-old writing assistant company plans to use the funds for sales and marketing, which allows it to preserve existing capital for strategic acquisitions.
The financing comes from General Catalyst's Customer Value Fund (CVF), a capital pool that provides growth funding to late-stage companies with predictable revenue. CVF's strategy effectively lends capital secured against a company's recurring revenue. Unlike a traditional venture round, General Catalyst takes no equity stake. Grammarly will instead repay the capital along with a fixed, capped percentage of the revenue generated from the deployed funds.
According to TechCrunch, this structure is attractive for companies like Grammarly because it is nondilutive and does not reset valuation. Grammarly was valued at $13 billion in 2021 during the zero interest-rate policy era. An investor in the company, who asked to remain anonymous, said its valuation in today's market is significantly lower. Grammarly did not immediately respond to TechCrunch's request for comment.
The company acquired productivity startup Coda in December and appointed Coda's CEO, Shishir Mehrotra, to lead Grammarly. It reports annual revenue above $700 million and is evolving into an AI productivity tool following the acquisition.
CVF has funded nearly 50 companies, including insurtech Lemonade and telehealth platform Ro. The fund maintains its own limited partners and was not part of General Catalyst's recent $8 billion capital raise. General Catalyst head Hemant Taneja and CVF co-head Pranav Singhvi previously discussed the strategy with TechCrunch.
The financing comes from General Catalyst's Customer Value Fund (CVF), a capital pool that provides growth funding to late-stage companies with predictable revenue. CVF's strategy effectively lends capital secured against a company's recurring revenue. Unlike a traditional venture round, General Catalyst takes no equity stake. Grammarly will instead repay the capital along with a fixed, capped percentage of the revenue generated from the deployed funds.
According to TechCrunch, this structure is attractive for companies like Grammarly because it is nondilutive and does not reset valuation. Grammarly was valued at $13 billion in 2021 during the zero interest-rate policy era. An investor in the company, who asked to remain anonymous, said its valuation in today's market is significantly lower. Grammarly did not immediately respond to TechCrunch's request for comment.
The company acquired productivity startup Coda in December and appointed Coda's CEO, Shishir Mehrotra, to lead Grammarly. It reports annual revenue above $700 million and is evolving into an AI productivity tool following the acquisition.
CVF has funded nearly 50 companies, including insurtech Lemonade and telehealth platform Ro. The fund maintains its own limited partners and was not part of General Catalyst's recent $8 billion capital raise. General Catalyst head Hemant Taneja and CVF co-head Pranav Singhvi previously discussed the strategy with TechCrunch.
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