Grammarly raises $90 million at a valuation of over $1 billion for its AI-powered grammar technology

While the popularity and sophistication of voice-based interfaces continue to draw attention, a firm that uses artificial intelligence to better how we communicate through the written word has raised a round of funding to accelerate its already lucrative expansion.

Grammarly, a toolset used by 20 million people to improve their written grammar, suggest better ways to express things and adjust the tone of what they say depending on who would be reading it, has closed a $90 million round of fundraising.

The company's CEO, Brad Hoover, confirmed to TechCrunch that the money boosts the company's valuation to more than $1 billion as it prepares to extend its products and bring them to more platforms to reach more consumers.

Grammarly is now available as a browser extension, a web app, mobile and desktop apps, and particular apps such as Microsoft Office. However, in our modern-day communication, the number of sites where we can write to each other is constantly expanding — consider how frequently we use chat and texting apps for both leisure and work — so anticipate that list to keep growing.

"The mountain of digital communication is growing, and we have more scattered teams in the workplace," he explained, "highlighting the necessity of people presenting themselves inconsistent and appealing ways."

General Catalyst is leading the latest round, which follows its previous and only other round, which raised $110 million in 2017 with participation from existing investor IVP and additional, unnamed backers. It raises the startup's total funding to $200 million.

Grammarly now works on a freemium model, with premium tiers offering additional features such as "readability" detection, alternative language and tone suggestions (not to be confused with tone policing), and plagiarism checks, with levels costing $11.66, $19.98, and $29.95 per month, respectively.

Hoover declined to specify how many of his customers pay for tiers or how much money the company gets from them, but he did acknowledge that, like other freemium services, the bulk of his users are free.

They are exposed to cookies and the like, just like other free users, but the company affirms to me that it does not profit from this and only makes money from subscriptions.

"We never sell or rent user data to third parties for any reason, including to serve their adverts," says the company. Period. "Our business model is a freemium approach," according to a spokesman, "in which we offer a free version of our product as well as Grammarly Premium and Grammarly Business, which are paid upgrades." "Grammarly's subscriptions are the only way it makes money."

It accepts that the lengthy privacy policy will be changed to make it shorter, but also acknowledges that the length can be intimidating.

"It's a reasonable criticism to argue that our privacy policy is longer and more wordy than it should be. We have erred on the side of fullness and detail to comply with numerous disclosure obligations imposed by legislation around the world, sacrificing brevity in the process," a spokeswoman stated. "The length of our privacy policy may be a deterrent to people reading the entire page." "Toward the conclusion, we make explicit declarations about not selling or renting personal data, and not sharing it for advertising."

It's worth noting that Grammarly has been profitable nearly since the beginning when it was formed as a bootstrapped company in 2009 by Alex Shevchenko and Max Lytvyn, who are still working on product and revenue at the firm (Hoover has been the CEO since 2011).

Grammarly's singularity of focus and straightforward message — it's only available in English and for written communications, with no intentions to grow into other languages or other mediums like audio — is partially why it's gained traction in the market, but it's also a result of the venture itself.

The company not only collects a massive amount of data about proper grammar, but it also uses AI techniques like machine learning and natural language processing to constantly synthesize new words, phrases, and styles to improve the assistance it provides to users, which is essentially an everyday problem for many people: writing well.

In an interview, Hemant Taneja, who led the investment for General Catalyst, said, "Grammarly is solving genuine difficulties that individuals experience every time they pick up a device to answer a text, answer a work email, or cold contact a new customer."

"While huge firms are working to develop in this sector, they aren't primarily focused on producing intuitive AI that compliments human natural communication talents. It isn't their third, fourth, or twentieth priority. Grammarly's main objective is to help people communicate more effectively. That's why they have more than 20 million daily active users, despite the competition." That level of 20 million is more than three times the number of Grammarly users in 2017.

Nonetheless, several potential competitors have developed, offering similar tools or directly competing with significantly different offerings. Google, for example, now provides you with suggestions on what to say in an email response in the form of stock words or signals as you type.

For a couple of reasons, according to Hoover, these are less of a concern for Grammarly. The first is its approach to being available wherever you're writing, and the second is its platform-agnostic state, which means it might be everywhere you're writing.

"The rise of platform-based aids has had no impact on us," Hoover added.

In the future, he said that, while Grammarly will be available on additional platforms, the firm would focus on developing new tools to better court enterprise customers and the use cases that are unique to them.

While this will not (yet) extend to verbal communication or other languages besides English, more tools based on the concept of "style guides" will be developed to help people in specific departments, such as customer service, maintain consistency in their language and how they represent the company to the outside world.

"One of the reasons businesses use Grammarly is to improve internal and external effectiveness," Hoover added. "This is a coaching tool, not a tool to write on behalf of users." He went on to say that this is also where the tone tool fits into the spectrum.

"We conducted a study of our users, and the results indicated that the majority of them were concerned about the tone they used in written communication," he said. "This isn't surprising because, unlike spoken or in-person conversations, non-verbal tones can't be used to convey a concept, therefore you risk being misunderstood."