Grammarly Secures $1B in Non-Dilutive Funding to Fuel AI-Powered Growth
Grammarly, the AI-powered writing assistant platform, has secured a landmark $1 billion commitment from venture capital firm General Catalyst. This strategic financing will accelerate the company’s expansion into AI productivity tools while preserving shareholder equity.
A Unique Financing Structure
The funding comes through General Catalyst’s innovative Customer Value Fund (CVF), which provides growth capital without requiring equity dilution. Key details of the deal:
- Grammarly will repay the capital plus a fixed, capped percentage of revenue generated from the funds
- No equity stake changes hands, protecting Grammarly’s valuation structure
- Funds will primarily support sales and marketing initiatives
- Existing capital can now be redirected toward strategic acquisitions
Why This Matters for Late-Stage Startups
This financing model offers significant advantages for mature tech companies:
✔️ Preserves valuation (Grammarly was last valued at $13B in 2021)
✔️ Avoids dilution for existing shareholders
✔️ Leverages recurring revenue as collateral
✔️ Provides growth capital without IPO pressure
“For companies with predictable revenue streams, this alternative financing can be game-changing,” notes a startup investor familiar with the deal who requested anonymity.
Grammarly’s Strategic Evolution
The funding follows several key developments for the 16-year-old company:
- Recent Acquisition: Purchased productivity startup Coda in December 2024
- Leadership Change: Appointed Coda CEO Shishir Mehrotra to lead Grammarly
- Revenue Growth: Generating over $700 million annually (BusinessWire 2025)
- AI Expansion: Transitioning from writing assistant to comprehensive productivity platform
About General Catalyst’s CVF
The Customer Value Fund has become a go-to resource for established tech companies, having provided similar financing to nearly 50 businesses including:
- Insurtech leader Lemonade
- Telehealth platform Ro
CVF operates with its own LP base and wasn’t part of General Catalyst’s recent $8 billion capital raise in 2024.
The Bigger Picture
This deal highlights how venture capital is evolving to meet the needs of late-stage startups in today’s challenging funding environment. By offering non-dilutive capital tied to revenue performance, investors like General Catalyst are creating new pathways for growth without the pressure of down rounds or premature exits.
Grammarly declined to comment beyond the official announcement, but industry analysts suggest this financing positions the company well for its next phase of AI-driven expansion.
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