Grammarly acquires Coda
The why behind the acquisition
Coda is acquired by Grammarly. I have been personally using Coda for a while now and I like it better than the alternatives. The acquisition seemed a bit weird to me since one offers a productivity software while the other one is a writing assistant. In this article we will look at the acquisition details and try to make sense out of it.
From the horse’s mouth
Coda and Grammarly both released statements about the acquisition here and here. The following is the TLDR version of publicly available information:
The Coda CEO wrote a planning memo for 2025 and titled it “The AI native productivity suite”. A close advisor (of Coda) suggested to connect with the Grammarly team.
The Grammarly and Coda team had a shared vision of how AI will transform productivity (chances are you have heard this pitch before).
While both were confident of their independent paths, together they could speed things up, ultimately leading to the acquisition.
Immediate future
Coda will provide personalised “context” to the Grammarly writing assistant. Grammarly writing assistant will integrate with the Coda workspace.
The Why?
While the public statements behind acquisitions are all hunky dory, they never speak about the business problems that led to the acquisition in the first place. In the rest of the article we will try to speculate the “Why” behind this acquisition.
Some prerequisites
Coda describes itself as a “doc as powerful as an app”. It was founded in 2014 and has raised $240 Million in funding over 6 rounds. Just in case you are not familiar with the product, it is very similar to Notion. Both started as doc editors and gradually expanded its features set to create an all in one productivity platform (i.e an alternative to Microsoft and Google’s suite).
Grammarly was founded in 2009, and has raised $400 Million till date. They describe themselves as a “Responsible AI that ensures your writing and reputation shine”. In other words, imagine it to be autocorrect on steroids. It will fix your writing for you. You can use it anywhere you type text (be it mail, slack, teams, substack etc.) via a browser extension or native app.
While the financial details of the acquisition have not been made public, Coda was last valued at $1.4 billion in 2021 and Grammarly was valued at $13 billion in 2021.
Grammarly has 40 million active users (at the time of writing this article), while Coda had 1 million plus active users in 2021.
On blinking cursors and platformization
In the Coda blog, the CEO says that:
While the Coda team has been busy redefining a new blinking cursor, the Grammarly team has been busy making every existing blinking cursor much smarter.
This sentiment to redefine the blinking cursor with AI is not unique to them. The browser company has reiterated the same idea in their new browser Dia’s early peak video.
But, what will you unlock by owning this omnipresent cursor? Product stickiness? Resistance to change? I suspect the answer is platformization. I had written more about this in the following article:
While I wold encourage you to go through the entire article, here is the crux:
A single use case is not defensible enough from a business perspective. All productivity tools start with a single use case (solving it extremely well). Then they gradually expand to other use cases via build or buy route.
What does Coda gain?
The productivity software market is super crowded. Major players include Microsoft suite, Google suite, Atlassian suite, Notion, Airtable, Clickup, Zoom amongst many others. While most offer generous free plans, business comes from enterprises. Interestingly, despite of targeting enterprise clients, most of these are product led rather than sales led.
Distribution
Coda’s website says that its clientele includes the likes of Figma, New York Times, Uber, Doordash, Square; however distribution and brand recall is not one of its strong suits.
In contrast, Notion a direct competitor of Coda has enjoyed significant success. In 2021, Notion’s valuation was 7 times that of Coda and the number of users were 20 times that of Coda. The difference has only increased since then. Notion boasted of 100 Million plus users in November 2024.
Do note that Notion faces its own set of challenges and only a small percentage of users are monetised. However, I was able to identify two reasons why Notion has fared better than Coda despite of having extremely similar products.
Marketing narrative and product led growth
Notion has a very strong community. Their marketing team has done an excellent job of creating templates for specific use cases. So instead of pitching themselves as a productivity platform they pitched specific templates aka mini apps which solved real life problems like habit tracking, budgeting, journaling etc. Once people get used to the product, they create new mini apps with lego like functionality for their own use cases. Gradually people start using it in their work life and promote it via word of mouth. By virtue of this, Notion enjoys the benefits of the ikea effect. Once you have built something which solves a personal problem, chances are you won’t be leaving the platform any time soon thus creating stickiness and an organic flywheel.
In contrast, Coda pitches itself as a document editor with app like interactivity despite of offering an extremely similar product. There are no growth flywheels. My hypothesis is that they believe in the philosophy of the product speaking for itself but unfortunately that is not enough. Social media has taught us that distribution can take precedence over quality.
Let’s look at some numbers:
Social media numbers are a decent proxy for distribution. Clearly Notion is way ahead. Now, with this acquisition, Coda will unlock Grammarly’s distribution. The acquisition will expose Coda to Grammarly’s 40 million active users. This alone will give the business a significant boost.
Platformization speed
Notion has platformized much faster than competition via acquisitions. It acquired Automate.io to improve integration capabilities, Cron for calendar software, Flowdash for improving project management capabilities, Skiff for a native mail client. All of these have helped it build a comprehensive product relatively quickly.
I am assuming the acquisition by Grammarly will help Coda ship products quicker by enabling access to more capital and engineering resources.
Investor pressure and exit opportunity
Remember that these startups are running on investor funding and are not self sustainable. While financial data ain’t public, I suspect Coda is not profitable yet. They are operating in a highly competitive industry. There is a sense of obligation to investors. The acquisition would give an exit opportunity to early investors.
What does Grammarly gain?
Defensibility and right to win
First off you might be wondering that what’s the utility of Grammarly with the proliferation of AI and LLMs? That’s the first thought that came to my mind as well. Any LLM can fix your writing. What USP does Grammarly have? If I were to venture a guess, it would be simplicity and convenience. Grammarly is present across all blinking cursors via the browser extension or native app. You don’t need to switch between multiple tabs or apps to fix your writing. It happens on the spot right where you are. Also, people are using it since the pre AI era. They stick to it just out of habit and familiarity. However, these reasons aren’t good enough for a user to continue using Grammarly in the long run.
Moreover, the free version of Grammarly is good enough for most users, so despite of unlocking distribution, they were unable to monetize a significant portion of their user base. In the post AI era, all of Grammarly’s functions could be done for free via any LLM. With the Coda acquisition, Grammarly gets a foot in the productivity software market. They gain defensibility and get a right to win. They will be able to monetize a greater section of the collective user base with a holistic product offering.
Context and new use cases
Apart from that, the original writing assistant will now have “context” from your Coda workspace so it should be able to give better suggestions. The union will unlock new use cases for the inline omnipresent assistant like web clipping, replacing niche web extensions.
In other news I read that Perplexity acquired this startup called Carbon which lets you connect external data sources (mail, codebase, docs, chat etc.) to LLMs thus enabling context. I suspect that Grammarly would have explored similar alternate solutions but the Coda acquisition unlocked a whole new treasure trove. I think Grammarly got the better end of the deal!
My opinion/ How are the redditors reacting?
Loyalist fans are never happy when their favourite product gets acquired. And their fears are absolutely legitimate. Core product features might get deprioritised to build AI agents. People have already started looking for alternatives. Coda has a good product but couldn’t scale. Grammarly has no PMF in post AI era.
A fellow redditor did a great job of summarising the acquisition and I share the same perspective: Business wise Grammarly has acquired Coda. Product wise, Coda will absorb Grammarly. This is further reinforced by the fact that Coda’s CEO will be the new CEO of the joint entity. Rest only time will tell how this turns out!
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