Grammarly receives $1B growth investment from General Catalyst's CVF

AI-driven transformation marks next phase for Grammarly

Grammarly has secured a $1 billion non-dilutive investment from General Catalyst, aiming to accelerate its evolution into a comprehensive AI productivity platform. The funding comes via General Catalyst’s Customer Value Fund (CVF) and is designed to support Grammarly’s product development, marketing efforts, and potential acquisitions.

Rather than taking an equity stake, General Catalyst will earn a capped return based on revenue generated from the investment's use in acquiring new customers. This structure offers Grammarly flexibility to redirect capital—traditionally spent on marketing—into innovation and expansion, while offering General Catalyst a more predictable route to returns.

Grammarly expands focus beyond writing assistance

Originally known for its writing assistant, Grammarly is now repositioning itself to offer a broader suite of tools that help users communicate and work more effectively. The platform already boasts over 40 million daily users and plans to leverage that user base by hosting third-party tools and expanding its AI capabilities.

Shishir Mehrotra, who took over as CEO in December after leading the productivity platform Coda, noted that the company is undergoing a fundamental shift. He emphasized that Grammarly’s move from a focused product to a full platform requires significant investment in both innovation and strategic growth.

While Mehrotra acknowledged that going public remains a long-term goal, he made it clear that the company is currently prioritizing rapid growth and product advancement. “We’re building out a much larger vision right now, and when we feel we’ve reached the right stage, an IPO will be the next natural step,” he indicated.

Non-traditional fund structure reflects investor strategy shift

The Customer Value Fund, which operates independently of General Catalyst’s main venture funds, represents a broader shift in strategy for the investment firm. Under the leadership of Hemant Taneja, General Catalyst is exploring alternative capital structures aimed at enabling sustainable, scalable growth for tech companies.

Pranav Singhvi, Managing Director at General Catalyst, explained that Grammarly's ability to consistently convert marketing spend into revenue made it an ideal candidate for this model. By channeling capital into acquisition efforts with proven ROI, the fund helps companies like Grammarly scale more efficiently.

CVF has previously invested in nearly 50 companies, including Lemonade and Fivetran, using performance-based metrics rather than equity stakes as the basis for funding. This approach not only aligns incentives between investors and companies but also offers an adaptable pathway for long-term collaboration.

Grammarly, founded in 2009, remains profitable and generates more than $700 million in annual revenue. It has raised over $550 million in venture capital to date and was last valued at $13 billion in 2021, according to data from PitchBook.