Grammarly Gets a Huge $1 Billion Boost to Grow with AI

Hey, so check this out! Grammarly, you know, the folks with that super helpful writing tool? Well, they just got a massive chunk of change – a whopping one billion dollars – from General Catalyst. And get this, it's not the kind of money where General Catalyst gets a piece of the company right away. It's what they call 'non-dilutive financing.'

What's Grammarly gonna do with all that cash? They wanna get even bigger, moving beyond just fixing your grammar. Their aim is to become like a full-on productivity hub, powered by AI, of course! They're gonna use that money for things like sales and marketing, and maybe even buy up some other cool companies.

The plan is to build more tools that help people talk and work together better, all thanks to AI. And they're even thinking about letting other companies put their tools on the Grammarly platform, which is pretty smart considering they have like, 40 million people using it every single day. That's a lot of eyes!

This investment is a big deal for General Catalyst, like one of their biggest from this specific fund they have. It sounds like it's designed to help companies like Grammarly, who are already doing well, grow even faster by giving them money specifically for getting new customers. Instead of using their regular money for that, Grammarly can use this new cash and put their own money into making their product even better.

In return, General Catalyst doesn't get ownership in Grammarly right now. Instead, they get a portion of the money Grammarly makes from using this new cash to get those new customers. It's like a percentage of the revenue generated from that specific growth push.

Grammarly has been around since 2009, which is a while! They're doing pretty great, bringing in over $700 million a year and they're actually making a profit. Pretty cool, right?

Just recently, back in December, they got a new boss, Shishir Mehrotra. He used to be in charge of this other productivity company called Coda. This kinda hints that Grammarly is definitely trying to get more into the AI-powered tools for work stuff.

Shishir mentioned in an interview that Grammarly is going through a big change. It's moving from being mostly known for just one thing to being like, a whole platform. He said it felt super important for them to go big on making their product better, maybe buying other companies, and just growing like crazy.

He also spilled the beans that eventually, Grammarly wants to go public, but there's no rush right now. He's focused on making new products and growing super fast. They'll go public when they feel totally ready.

If this investment pays off, and it seems like it could, it could make Grammarly even more valuable. And General Catalyst might benefit too, since they also invested in Grammarly way back in 2017. Apparently, Grammarly, which is based in San Francisco, has raised over $550 million in total from investors. The last time they were valued, back in 2021, they were worth a whopping $13 billion!

The money General Catalyst invested here comes from a different fund than their main ones, with different investors involved. This specific fund isn't part of that big $8 billion they just announced they raised. It sounds like General Catalyst is trying out new ways of doing things, not just the old-school venture capital stuff. This customer acquisition fund has invested in almost 50 companies already, like Lemonade and Fivetran, aiming for a more predictable way to make money back.

Pranav Singhvi, a big shot at General Catalyst, put it this way: companies like Grammarly basically have a system where they can put money into sales and marketing and get a really consistent return. With all the exciting stuff happening with AI, giving Grammarly this extra boost could help them get way more customers, even more than the 40 million they have now. Pretty wild to think about, huh?