Grammarly obtained a $ 1 billion commitment from General Catalyst. The 14 -year -old writing assistant startup will use new funds for her sales and marketing efforts, freeing existing capital to make strategic acquisitions.
Unlike a traditional tour, General Catalyst will not receive participation in the company in exchange for investment. Instead, Grammarly will reimburse the capital with a fixed percentage and capped with income which it generates from the use of General Catalyst funds.
The investment comes from the General Catalyst Customer Value Fund (CVF), a pool of capital that helps startups at an advanced stage with foreseeable sources of income deployed new funding specifically to the growth of their businesses. The alternative CVF financing strategy “lends” essentially of capital guaranteed by the recurring income of a company.
For companies like Grammarly, this form of financing is advantageous because it is not dilutive and does not reset the assessment of the company. Grammar was evaluated at $ 13 billion in 2021 during the peak of the ZIRP era. However, the company’s assessment on the current market is significantly lower, according to an investor of the company who asked to remain anonymous.
Grammar did not immediately respond to a request for comments.
In December, Grammarly acquired the productivity startup Coda and appointed its CEO, Shishir Mehrotra, to direct Grammarly. The company, which is evolving towards an AI productivity tool after the acquisition, has an annual turnover of more than $ 700 million.
The General Catalyst Customer Value Fund has financed nearly 50 companies, including Surtech Lemonade and the RO TV platform. CVF maintains its own separate limited partners and was not included in the recent capital increase of $ 8 billion in the company.
The head of the General Catalyst Honcho Hemant Taneja and Pranav Singhvi, CVF co-head, discussed Techcrunch with the specialized financing strategy of the group last fall last.
