Grammarly Secures 1 Billion Non Dilutive Funding from General Catalyst

Grammarly, the 14-year-old writing assistant startup, has secured a groundbreaking $1 billion funding commitment from General Catalyst’s Customer Value Fund (CVF). Unlike traditional venture capital rounds where equity is exchanged, this deal uses a revenue-based financing model. Grammarly will repay the capital with a fixed, capped percentage of revenue generated from the investment, preserving ownership and avoiding valuation resets.

This non-dilutive funding approach is especially advantageous in today’s market, where Grammarly’s valuation has softened since its $13 billion peak in 2021. The capital infusion will primarily fuel sales and marketing expansion, while freeing existing funds for strategic acquisitions, such as the recent purchase of productivity startup Coda. Grammarly is evolving beyond writing assistance into a broader AI productivity platform, boasting over $700 million in annual revenue.

General Catalyst’s Customer Value Fund specializes in revenue-based investing, targeting late-stage startups with predictable recurring revenue. This fund has supported nearly 50 companies, including Lemonade and Ro, by providing capital secured against future revenues rather than equity stakes. CVF operates independently from General Catalyst’s main $8 billion capital pool, focusing on growth without dilution.

This innovative financing model is reshaping how tech companies like Grammarly scale. By aligning capital deployment with revenue performance, startups maintain control and flexibility while accelerating growth. It’s a compelling alternative to traditional equity rounds, especially in uncertain market conditions where preserving valuation is critical.

Why Revenue-Based Financing Matters for AI Startups

Revenue-based financing offers a strategic advantage for AI startups with steady income streams. It enables:

• Non-dilutive capital infusion preserving founder and investor equity
• Alignment of repayment with revenue performance, reducing financial risk
• Flexibility to deploy existing capital for strategic growth initiatives like acquisitions
• Preservation of company valuation without resets common in equity rounds

The Future of Funding for Tech Innovators

Grammarly’s $1 billion deal exemplifies a broader shift toward alternative financing in the tech sector. As startups mature and market conditions fluctuate, revenue-based financing offers a powerful tool to balance growth ambitions with financial prudence. For AI-driven companies, this means more runway to innovate and scale without sacrificing ownership or strategic direction.

For entrepreneurs and investors alike, understanding these evolving capital strategies is essential. They open new pathways to fund innovation while safeguarding long-term value. Grammarly’s partnership with General Catalyst’s Customer Value Fund is a case study in how smart financing can fuel the next wave of AI productivity tools.