San Francisco, NFAPost: Grammarly has secured a $1 billion commitment from General Catalyst. The 14-year-old writing assistant startup will use the new funds for its sales and marketing efforts, freeing up existing capital to make strategic acquisitions.
Unlike a traditional venture round, General Catalyst will not receive an equity stake in the company in return for the investment. Instead, Grammarly will repay the capital along with a fixed, capped percentage of revenue it generates from the use of General Catalyst’s funds.
The investment comes from General Catalyst’s Customer Value Fund (CVF), a capital pool that helps late-stage startups with predictable revenue streams deploy new funding specifically to growing their businesses. CVF’s alternative financing strategy essentially “lends” capital that is secured by a company’s recurring revenue.
For companies like Grammarly, this form of financing is advantageous because it’s nondilutive and does not reset the company’s valuation. Grammarly was valued at $13 billion in 2021, during the peak of the ZIRP (zero interest-rate policy) era. However, the company’s valuation in today’s market is significantly lower, according to an investor in the company who asked to remain anonymous.
Leave a Reply