Grammarly Raises $1 Billion Non-Dilutive Funding from General Catalyst to Accelerate AI Growth
Grammarly, the widely used writing assistant software, has managed to raise $1 billion in non-dilutive funding from General Catalyst to scale its artificial intelligence (AI) business, according to Reuters.
This investment is intended to turn Grammarly into a more overarching productivity suite. The company intends to use this capital to increase sales and marketing efforts, make strategic acquisitions, and expand its base in AI-driven communication tools.
Establishing an AI-Driven Platform for Communication
Grammarly, which has a reputation for AI-powered writing support, plans to employ this capital to expand its platform's functionalities in the area of communication-driven productivity tools. The investment will also enable the company to host third-party tools, leveraging its 40 million daily users to increase its platform's presence.
The collaboration will enable Grammarly to accelerate growth faster, channeling funds previously spent on new customer acquisition into more product innovation and development, which may speed up its growth path.
Non-Dilutive Financing Structure
According to Reuters, General Catalyst's investment does not call for equity in Grammarly, unlike the conventional venture capital financing. The investment rather takes the form of a capped return tied to the revenue derived from Grammarly's customer acquisition initiatives, enabling General Catalyst to receive a proportion of the revenue directly attributable to the capital it invested.
Grammarly's Vision for Broader AI Tools
Founded in 2009, Grammarly has achieved substantial growth, surpassing $700 million in annual revenue. The company is now focusing on expanding its product suite to include broader workplace tools powered by AI, following the recent appointment of Shishir Mehrotra, the former CEO of Coda, as the new leader.
Under his direction, Grammarly plans to grow from being a one-trick agent to a wider AI platform, gearing up to become a major player in the AI-powered productivity category.
Also read: Chalk Raises $50 Million Series A to Power Real-Time AI Inference
Strategic Shift in Growth Investment
This funding is a departure from General Catalyst's investment strategy. The company, led by CEO Hemant Taneja, is venturing into new funding models outside traditional venture capital. Through its Customer Value Fund (CVF), which runs alongside but separately from its core venture funds, General Catalyst has invested in Lemonade and Fivetran, using growth metrics to achieve more predictable returns.
Possible Impact and Future Plans
Grammarly's rapid expansion, including a valuation of $13 billion in 2021, has been supported by strategic investments like this non-dilutive funding round. This collaboration with General Catalyst will enable Grammarly to reach out beyond its current 40 million users and further establish itself in the AI-powered productivity space.
