Grammarly raises a whopping $1B to fuel AI expansion

Grammarly, the popular productivity giant that allows users to create high-quality content while eliminating grammatical and sentence formatting errors, has raised $1 billion in non-dilutive funding from General Catalyst. 

According to the reports, the funding will be used by the company to expand the AI capabilities of the platform to transform it into a full-fledged productivity tool for the users. Also, the fund will be utilized for sales, marketing, and strategic acquisitions. 

AI Tools Development and Third-Party Tools Integration 

The investment of $1 billion from General Catalyst’s Customer Value Fund is one of the largest investments that the company has secured to date, which is definitely going to lead a sharp growth. Talking about the fund utilization, Grammarly intends to focus on building more communication-based AI tools that will contribute to the overall usability of the platform. 

Moreover, the third-party tools will also be acquired and hosted on the platform. It will allow 140 million daily Grammarly users to access these tools and streamline their workflow. 

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The Funding Structure for Grammarly

It has been made clear by the company that General Catalyst won’t be getting any equity in shares of Grammarly against the investment. Rather, Grammarly will pay back the investment with a capped return by generating revenue and acquiring more customers. 

So, a percentage of revenue generated from the fund will definitely be dedicated to acquiring more customers through marketing, sales, and product development.  

Glimpses Into Grammarly’s Future Plans 

Grammarly has acquired Coda, a productivity tool, and appointed Shishir Mehrotra, the former CEO of Coda, as the new leader of Grammarly in December. According to Mehrotra, it is important to bend toward product development and growth strategies to transform the current single-purpose agent into a multi-tasking productivity platform. 

Mehrotra also made it clear that Grammarly plans to go public in the future, but has no immediate plans for it. Currently, the firm is focusing more on driving innovation and introducing new products to acquire a user base. 

General Catalyst had also invested in the Series B funding round of Grammarly in 2017. The increasing valuation of Grammarly is also expected to give a good ROI to General Catalyt for its previous funding. 

Currently, Grammarly has over 40 million daily users and generates an annual revenue of $700 million. The integration of the Coda platform has significantly added to the overall capabilities of the platform and usefulness for the targeted audience. 

Investment Aligning with Current Market Trends 

The big investment of General Catalyst aligns well with the current marketing timing, when 78% of organizations around the world are already utilizing AI in their business operations. Similarly, according to the McKinsey report, AI could add more than $4.4 trillion in productivity growth across industries. 

Similarly, the Stanford AI Index reports that private investments in AI reached $109.1 billion, with generative AI specifically securing the investment of $33.9 billion alone in the USA. The numbers well-portray the market moving toward AI. 

In such a scenario, there are high chances that the strategic moves of Grammarly might transform it into one of the biggest AI tools in the future.