Sword Health Raises $40M at $4B Valuation, IPO Delayed

Sword Health Secures $40 Million in Funding

Sword Health, a digital health company leveraging artificial intelligence, has successfully completed a funding round of $40 million. This investment results in a company valuation of $4 billion, representing a substantial 33% increase compared to the $3 billion valuation achieved just one year prior.

General Catalyst spearheaded the funding initiative as a returning investor.

Strategic Rationale for Funding

Despite already being cash-flow positive, Sword Health’s CEO and founder, Virgílio Bento, explained to TechCrunch that the decision to seek additional capital was driven by two primary objectives.

• Updating the company’s current valuation.
• Ensuring readily available funds for potential strategic acquisitions.

This proactive approach aims to position the company for continued growth and expansion.

Evolution of Services and IPO Considerations

Initially focused on virtual physical therapy, Sword Health has broadened its service offerings to encompass pelvic health and mental health support.

Previously, the company had contemplated an initial public offering (IPO) in the near future. Bento had indicated in the past that a listing in 2025 was a viable possibility.

Re-evaluation of IPO Timeline

However, despite the successful IPOs of competitors like Hinge Health and Omada, and Sword Health’s robust annual revenue run rate of $240 million, Bento is now reconsidering these plans.

He stated that an IPO is now anticipated to occur at a later date than previously expected.

Expanding the Scope of AI-Powered Care

Bento envisions Sword Health’s AI care specialist, Phoenix, extending its reach beyond musculoskeletal pain and pelvic floor care.

The goal is to apply remote healthcare solutions to a wider range of conditions, including cardiovascular health, gastroenterological issues, and speech therapy.

Revised IPO Target

“I want to IPO when I have lots of different proof points at scale in many different care verticals — so maybe 2028,” Bento explained.

This revised timeline reflects a desire to demonstrate a broader and more established track record of success across multiple healthcare areas.

Due Diligence and IPO Concerns

In recent months, Bento has actively engaged in an “educational journey,” consulting with CEOs of publicly traded companies and financial bankers to gain a deeper understanding of the complexities of managing a public entity.

Following this period of research, he concluded that the arguments against an IPO outweigh the potential benefits.

Alternative Perspectives on Going Public

Bento expressed skepticism regarding the conventional justifications for an IPO, such as brand recognition or access to capital.

He cited Ikea and Lego as examples of thriving private companies that have successfully secured substantial private funding, referencing Databricks’ recent $10 billion raise.

Liquidity Options for Stakeholders

Bento also highlighted the availability of liquidity for employees and early investors through secondary markets.

Sword Health is planning to launch a tender offer in the coming month to facilitate this.

Future Funding Prospects

Sword Health anticipates raising additional capital in the following year, with Bento even predicting the size and valuation of the next funding round.

“Last year, we raised $30 million at a $3 billion valuation. This year, we did $40 million at $4 billion. I think you can imagine the type of raise we’re going to do next year, which is probably going to be $50 million at $5 billion,” he stated.

He acknowledged the “numerical symmetry” as a motivating factor.

Total Funding and Investors

This latest funding round brings Sword Health’s total funding to $380 million.

Additional investors in this round include Khosla Ventures, Comcast Ventures, Lince Capital, Oxy Capital, Armilar, Indico Capital, and Shilling.