Grammarly raises a whopping $1B to fuel AI expansion
What's the story
Grammarly, the popular writing assistant tool, has raised $1 billion in non-dilutive funding from General Catalyst. The investment is aimed at expanding Grammarly's artificial intelligence (AI) capabilities and transforming it into a full-fledged productivity platform. The company plans to use the funds for sales and marketing expenses as well as strategic acquisitions.
Expansion strategy
Grammarly's plans for AI and 3rd-party tools
Grammarly intends to use the new capital to build more communication-based productivity tools with AI. The company also plans to host third-party tools on its platform, leveraging access to its 40 million daily users. This investment from General Catalyst's Customer Value Fund (CVF) is one of the largest in its history and could help Grammarly accelerate growth.
Funding details
General Catalyst's unique funding structure and Grammarly's growth
Unlike traditional venture rounds, General Catalyst won't get an equity stake in Grammarly for this investment. Instead, the company will repay the capital with a capped return linked to revenue generated through its use. This is structured as a percentage of revenue generated from the fund being used in customer acquisition. The move allows Grammarly to reallocate funds typically tied up in sales and marketing toward product development.
Strategic shift
Grammarly's leadership change and future plans
In December, Grammarly appointed Shishir Mehrotra, former CEO of productivity platform Coda, as its new leader. The move signals a shift toward broader AI-powered workplace tools. Mehrotra said it was important for the company to bet big on product development and growth strategies as it transforms from being a single-purpose agent to an agent platform.
Future prospects
Grammarly's public offering and General Catalyst's stake
Mehrotra also said that while the company has plans to go public, there are no immediate plans for it. He emphasized the focus on innovation with new products and growth. The dedicated growth investment could also improve Grammarly's valuation, which might indirectly benefit General Catalyst's previous stake in the company, as it had invested in Grammarly's series B funding round in 2017.