Grammarly just raised $1B to go from proofreader to AI powerhouse

Grammarly has secured $1 billion in non-dilutive funding from venture firm General Catalyst to accelerate its transformation from a writing assistant into a full-fledged AI-powered productivity platform, the companies announced Thursday.

The investment, one of the largest from General Catalyst’s Customer Value Fund (CVF), comes with a twist: no equity changes hands. Instead of taking a stake, the VC firm will earn a capped return tied to the revenue Grammarly generates from using the capital for customer acquisition.

Grammarly, which serves over 40 million daily users, plans to use the funds for sales and marketing, strategic acquisitions, and product expansion. The company’s goal is to broaden beyond grammar and writing into AI-driven workplace tools, and eventually allow third-party applications to operate on its platform.

“This is a huge transformation—from a single-purpose agent to an agent platform,” said CEO Shishir Mehrotra in an interview. “It felt very important for us to be able to bet big on product development, M&A, and growth strategies.”

Mehrotra, who joined Grammarly in December after leading the productivity platform Coda, said the company has long-term plans to go public. “I'm just focused on making sure we're innovating with new products and growing fast. But when we feel ready, we'll go public,” he said.

Fueling growth without dilution

The funding model exemplifies a shift in late-stage tech financing, where companies with proven growth engines can raise capital without giving up equity. General Catalyst’s CVF allows such companies to unlock new customer acquisition budgets while redirecting internal capital toward innovation.

“Companies like Grammarly basically have a machine where they can invest dollars in sales and marketing and generate a very consistent return,” said Pranav Singhvi, Managing Director at General Catalyst. “With this wave of AI, giving Grammarly the firepower to actually go and invest could land those customers beyond the 40 million.”

The deal also aligns with General Catalyst’s broader mission to reinvent venture capital, under the leadership of CEO Hemant Taneja. The CVF operates independently of the firm’s traditional VC funds, including its recent $8 billion capital raise, and has backed nearly 50 companies, including Lemonade and Fivetran.

About Grammarly

Founded in 2009, San Francisco-based Grammarly boasts over $700 million in annual revenue, is profitable, and has raised more than $550 million in venture capital to date. It was last valued at $13 billion in 2021, according to PitchBook.