Grammarly’s Next Chapter: Ukrainian-Born Unicorn Secures USD 1B Funding to Fuel AI Productivity Leap

• Grammarly, a Ukrainian-born AI writing assistant, continues to transform communication
• The unicorn company recently secured USD 1B of on-dilutive funding from General Catalyst
• Accelerated growth plans include scaling sales, marketing, and strategic acquisitions
• The overall ambition is to extend Grammarly’s AI productivity platform reach and expand its global customer base

This May, the world-famous Ukrainian-born unicorn Grammarly announced a round of non-dilutive financing from its long-standing supporter General Catalyst. The USD 1B funding is provided from the firm’s Capital Value Fund (CVF).

Exemplary Evolution, Remarkable Growth into a Global Leader, and Strategic Shift

Grammarly is a true flagship of Ukraine’s tech startup scene and needs no introduction. To recap, Grammarly is an AI-powered writing assistant. It was founded back in 2009 by Max Lytvyn, Alex Shevchenko, and Dmytro Lider. Previously, they had developed a tool called MyDropBox, an anti-plagiarism solution for students. This experience provided a crucially insightful observation: they found out that students often plagiarized not out of ill intent but due to difficulties in articulating their own thoughts. This, combined with their personal struggles with writing, convinced them of a profound need for a tool that could genuinely help people improve their communication skills. This eventually grew into Grammarly.

What followed was an exemplary evolution from a basic grammar checker to a broad AI-powered communication and productivity platform. In 2009, the company launched its first product as a subscription-based grammar and spelling checker primarily for students. Over the years, Grammarly continuously integrated advanced AI and machine learning (long before the current AI boom), developing sophisticated NLP algorithms to offer context-specific suggestions, tone detection, and vocabulary enhancement.

With its unique offering, the platform saw remarkable growth. In 2015, it could already boast about 1 million daily active users, and by 2020, this number grew to 30 million by 2020. To date, Grammarly reports 40 million daily active users. The solution’s initial focus on academics broadened to serve both individual consumers and enterprises, now supporting over 50,000 organizations, including a whopping 96% of Fortune 500 companies. This was aided by the expansion of Grammarly’s accessibility through integrations with major productivity tools like Microsoft Word, Google Docs, and more desktop, mobile, and web browser applications.

A major strategic shift occurred with the acquisition of productivity startup Coda in January this year and the appointment of Shishir Mehrotra of Coda as Grammarly’s new CEO. This move signals Grammarly’s ambition to transform further into a comprehensive AI productivity platform.

‘Integrating Coda and Grammarly has unlocked tremendous potential for how people work and communicate. I’m energized by the innovation happening across our teams as Grammarly has become a productivity platform serving everyone from individual students to growing businesses to large enterprises. The breadth of what we can now offer is truly compelling,’ Mr Mehrotra states.

Following the Vision

This is in line with Grammarly tackling its ongoing primary challenge of staying at the forefront of the rapidly evolving AI landscape. By expanding its core functionality beyond grammar checking to include generative AI and broader productivity tools, Grammarly strategically positions itself against emerging AI competitors.

Grammarly is targeting a broad range of industries and professional functions with its AI platform, rather than specific, narrow verticals. It aims to drive enterprise adoption through transformed workflows and communication across industries. In other words, to serve diverse professional teams such as marketers, sales professionals, engineers, support specialists, entrepreneurs, and of course, students. The overarching focus is on enhancing communication and productivity universally across various sectors.

Commitment to Responsible AI and User Control

The company emphasizes the ethical use of AI through a robust and principled approach, particularly for features involving tone detection, persuasion, or content suggestion. The team explicitly commits to never selling user data and ensuring the safety of user content through encryption and strict policies, underlining that it earns on subscriptions only.

Dedicated to mitigating bias and fostering inclusion, Grammarly builds its AI models with high-quality, diverse datasets and integrates analytical linguists and human expertise throughout the development process. The company assures that every new AI feature undergoes a rigorous risk-assessment process, including human review, to evaluate potential issues related to privacy, security, fairness, safety, and potential for abuse, ensuring ethical alignment before deployment. Additionally, content filtering is implemented to reduce harmful outputs, such as hate speech.

Underlining user autonomy, Grammarly insists on viewing AI as an augmentative tool rather than a replacement of human judgment. To ensure users remain in control:

• users are welcome to accept or reject any AI-generated suggestions;
• you can turn off various AI features based on your preferences and customize the types of suggestions you receive through your settings;
• Grammarly provides context for AI suggestions, empowering users to make informed decisions about how and when to incorporate AI assistance into their writing.

Priority Attention to Feedback and Cultural Nuance

Keen on actively incorporating user feedback and behavioral data to refine and shape new AI features, Grammarly actively seeks and reviews user feedback, with a dedicated support team collecting reports. Such a direct feedback mechanism allows the team to identify and improve any potentially incorrect (or even harmful) information generated by the product. Model performance is under constant monitoring to ensure adherence to the previously mentioned responsible AI standards.

As Grammarly expands globally, it addresses localization and cultural nuance with a multi-faceted strategy. There is a translation tool supporting 19 widely spoken languages, designed to capture nuances and preserve original intent, utilizing multiple AI models guided by responsible AI principles. Additionally, this involves internal linguistic expertise and proprietary technology to produce professional translations with a special emphasis on avoiding harmful language and inappropriate slang. Acknowledging that AI still struggles with tone and cultural sensitivity, Grammarly employs human review to ensure that the generated content truly resonates with the target audience and is culturally appropriate, resulting in a hybrid human-AI approach.

Grammarly and General Catalyst: Continued Partnership and Non-Dilutive Funding

General Catalyst has been Grammarly’s loyal supporter since 2017 when the fund led the company’s USD 110M funding round.

‘We’ve been working with the Grammarly team for years as they became an early leader in applied AI,’ General Catalyst’s CEO Hemant Taneja reminds.

‘We are confident that this extension of our partnership will create significant long-term value and continue to drive Grammarly’s ability to accelerate enterprise adoption through transformed workflows and communication across industries,’ he continues.

The recent USD 1B funding from General Catalyst’s Customer Value Fund (CVF) is non-dilutive, meaning that Grammarly receives capital without issuing new equity The advantages of such funding over traditional equity investment include:

• Retention of Ownership and Control: Grammarly’s founders and existing shareholders retain full ownership and control, preserving their decision-making power and the company’s long-term vision without dilution.
• No Equity Sacrificed: Unlike with equity funding, Grammarly doesn’t give away a percentage of the company or all future profits.
• Strategic Alignment: This revenue-based financing model allows Grammarly to fund customer acquisition and growth initiatives with the revenue generated by new customers repaying the investment. This directly aligns the repayment with the company’s performance.

‘This investment represents more than just capital. We believe it’s a strategic enabler for the next phase of Grammarly’s growth,’ Pranav Singhvi, managing director and co-head of the Capital Value Fund at General Catalyst, notes.

‘With General Catalyst’s continued partnership and confidence in our vision, we can scale faster and more sustainably to reach the millions of people who can benefit from our tools,’ Mr Mahrotra adds.

Strategic Investment for Accelerated Growth

Grammarly plans to use the new funding to scale sales and marketing and for strategic acquisitions, as well as to grow its customer base and extend the reach of its AI productivity platform. These plans presuppose several key operational steps:

• Aggressive Sales and Marketing Expansion: This involves substantial investment in growing the sales team, developing and executing new marketing campaigns, and increasing global brand awareness to reach even broader audiences.
• Robust M&A Strategy: Following the acquisition of Coda, there are more potential companies and technologies to identify, evaluate, and integrate, that strategically complement Grammarly’s AI capabilities and expand its market presence. This involves thorough due diligence, negotiation, and post-acquisition integration plans.
• Enforced Product Innovation and R&D: A significant portion of the raised funds will be allocated to hire more AI researchers and engineers and develop more advanced AI features (e.g. more sophisticated generative AI capabilities, deeper integrations within existing workflows).
• Strategic Customer Acquisition and Retention: Innovative strategies are to be developed to attract new individual users and enterprise clients, while also enhancing existing customer loyalty programs and services to ensure sustained growth.
• Deepening Enterprise Market Penetration: Focusing on tailored solutions and dedicated support for large organizations, aiming to seamlessly integrate Grammarly’s AI into complex enterprise workflows to drive widespread adoption across diverse industries.

These measures underscore Grammarly’s strategic focus on accelerating its transformation into a comprehensive AI productivity platform.

‘Grammarly is more than just a success story. This is an instruction for all Ukrainian startup: don’t rush to count yourself out, even in a changing market. Ukrainian entrepreneurs learn to survive since their earliest days, act quickly, build in spite of uncertainties, And this is what comprises our hidden resource. Grammarly didn’t break because they had a strategic vision and learned to build not ‘for now’ but ‘for later.’ This is something rare these days, especially in the startup scene. Investors support more than just a set of features but a team that knows how to stay afloat,’ Movadex’ co-founder and Knight-Hennessy scholar at Stanford Salome Mikadze comments.

Born from the innovative spirit of its Ukrainian founders, Grammarly has grown to play a crucial role in modern communication by serving as an advanced AI-powered writing assistant. It empowers millions of individuals and organizations to articulate their thoughts clearly, effectively, and with cultural nuance, enhancing overall communication quality. This enduring commitment to augmenting human communication skills across diverse contexts underscores Grammarly’s global impact and vital importance in an increasingly interconnected world.