Grammarly, the writing assistant platform, has completed an investment term sheet with General Catalyst, for a commitment of $1 billion, through the venture firm’s Customer Value Fund (CVF).

Grammarly Future Outlook

The funding is structured to support Grammarly’s continued sales and marketing expansion, while also allowing the company to preserve their current capital for possible acquisitions and larger strategic purposes.

The new financing mechanism does not have the typical equity relationship of funded venture firm investments. Instead, Grammarly will pay back General Catalyst via a capped percentage of revenue resulting from the utilization of the funds.

This nondilutive structure allows Grammarly to keep its current valuation and shareholder structure, which continues to make this model more appealing for more mature startups with reasonable recurring revenue.

The CVF was established to provide revenue-based financing options for late-stage companies, without the headaches of valuation resets and equity dilutions. This continues the CVF’s theme of providing similar support to other companies in experience like Lemonade and Ro. It was also mentioned that the CVF operates with its own limited partners, separate from the recent $8 billion fundraise by General Catalyst.

Grammarly, which purchased productivity software startup Coda in December, is going through a larger transformation into a comprehensive AI-enabled productivity platform. Coda’s former CEO, Shishir Mehrotra, is now at the helm of Grammarly. The company generates just over $700m a year in revenue.

Grammarly was valued at $13 billion at the peak of the zero interest-rate policy (ZIRP) in 2021, according to two familiar sources. However, based on its current valuation and the commitment to funding, Grammarly properties its valuation to current conditions in the market. Grammarly has not publicly stated its current valuation or any funding commitment.