Sword Health nabs $40M at $4B valuation, pushes IPO plans to at least 2028

Sword Health, a digital health startup leveraging artificial intelligence, has successfully raised $40 million, boosting its valuation to an impressive $4 billion—a significant increase from last year’s $3 billion. This funding round was spearheaded by General Catalyst, a returning investor. Despite being cash-flow positive after ten years in operation, CEO and founder Virgílio Bento shared with TechCrunch that the decision to pursue additional funding stemmed from two primary objectives: updating the company’s valuation and preparing for potential strategic acquisitions. Originally starting as a virtual physical therapy provider, Sword Health has broadened its services to include pelvic and mental health care. While Bento had previously suggested an initial public offering (IPO) could occur as early as 2025, he is now reassessing this timeline. “It’s going to be much later than everyone expects,” he stated. With a robust annual revenue run rate of $240 million, he cites the successful public offerings of competitors Hinge Health and Omada as contributing factors to his decision to delay. Bento’s vision for the company includes expanding its AI care specialist, Phoenix, to offer remote healthcare solutions for various conditions beyond musculoskeletal and pelvic issues, such as cardiovascular and gastroenterological health, as well as speech therapy. He aims to have multiple proof points across various care sectors before considering an IPO, tentatively eyeing 2028. In recent months, Bento has embarked on what he describes as an “educational journey” to better understand the intricacies of public company management. He has engaged in discussions with CEOs of publicly traded companies and investment bankers. “After this education period, I found I could list ten reasons against going public, while I struggled to identify a single compelling reason to do so,” he remarked. Bento expressed skepticism about the traditional motivations for an IPO, such as enhancing brand visibility or gaining capital access. Citing successful private companies like Ikea and Lego, he noted that strong startups can still attract significant private investment, referencing Databricks’ impressive $10 billion funding round. He also highlighted that liquidity for employees and early investors can be achieved through secondary markets, hinting that Sword might initiate a tender offer next month. Looking ahead, Sword Health anticipates raising further capital in the coming year. Bento confidently predicted the scale of the next funding round, estimating it could reach $50 million at a valuation of $5 billion. “I enjoy the numerical symmetry; it’s fun,” he quipped. With this latest funding, Sword Health’s total capital raised now stands at $380 million, with notable participation from Khosla Ventures, Comcast Ventures, Lince Capital, Oxy Capital, Armilar, Indico Capital, and Shilling.