Grammarly Purchases Coda to Broaden AI Capabilities

Grammarly, the AI-powered writing assistant valued at $13 billion, has just made a significant move in the tech world by acquiring productivity startup Coda. In an unexpected twist, Shishir Mehrotra, CEO of Coda, will be stepping into the role of Grammarly’s new CEO. It’s a business turn that seems straight out of a drama, doesn’t it?

Grammarly, a veteran in the field, has been around since 2009 and is considered one of the early adopters of AI in writing tools. However, with the rise of GenAI and increasing competition, the company has been feeling the heat. Recognizing the potential in Coda, Grammarly decided that a merger could elevate it from a writing-focused tool to a broader platform with a full array of productivity features. It’s a smart and strategic play.

Axios has uncovered some intriguing details about the transaction. This is an all-stock deal based on both companies' most recent funding valuations, making it a well-matched pairing in terms of financial strength. Grammarly’s investors include major players like General Catalyst, IVP, and SignalFire, with the company having raised approximately $400 million in total. On the other hand, Coda has raised around $320 million from notable firms such as General Catalyst, Greylock, and Kleiner Perkins. After the merger, Grammarly’s shareholders will hold around 90% of the combined entity, as Coda’s current valuation stands at $1.3 billion. Both companies had their own interests and calculations in this transaction, and the deal is a well-thought-out strategic alignment.

This acquisition wasn’t drawn out over months—quite the opposite. The deal moved at an astonishing pace, as if the momentum of the AI revolution was propelling it forward. Mehrotra shared with Axios that the first talks between the two companies took place just three weeks ago, and by Monday, they had already sealed the deal. It was a lightning-fast transaction. When asked about the specifics, Mehrotra remained tight-lipped, offering a smile and stating that he couldn’t share further details at the moment. Meanwhile, the outgoing CEO of Grammarly, Rahul Roy-Chowdhury, who joined the company in 2021 from Google, seems to have seamlessly aligned with the vision for this leadership transition, which sets the stage for a unified strategy moving forward.