Recently, Sword Health, an AI-powered virtual physical therapy startup, secured a substantial $30 million in funding. Additionally, the company allowed its employees to sell $100 million worth of equity to both new and existing investors, with Khosla Ventures among them. The latest funding round has boosted the company’s valuation to $3 billion, marking a significant 50% increase compared to its Series D round in November 2021.
According to Sword’s CEO and founder, Virgílio Bento, the company’s original plan was to conduct a $100 million secondary round, which would enable employees and early investors to sell their shares, as reported by Eltrys. Realizing the oversubscription in the secondary round, the company decided strategically to initiate a $30 million primary round and revise its valuation.
It’s a demanding atmosphere with extended work hours and lofty performance standards. We wanted to show our appreciation to our team, particularly our early employees,” he said. 
According to Bento, Sword is confident in its profitability by the end of the year and therefore does not require additional capital. Nevertheless, he appreciated the significance of an updated valuation amidst the challenging fundraising conditions of 2024.
Bento commented, “We widely regard the valuations of 2021 as questionable, considering the irrationality of the market.” Although the majority of employees are aware of the company’s success, Sword’s clients, which consist of Fortune 500 companies’ employers and health plans, lacked a definitive method of measuring the company’s growth. “We wanted to highlight our progress, and valuation serves as one measure of that.”
The company will not use the $30 million for operational purposes. Bento stated, “We will deposit it in the bank and earn a decent amount of interest.”
Sword’s total funding now stands at $340 million after the latest primary round. Alongside Khosla Ventures, the company has secured investments from General Catalyst, BOND, Founders Fund, and other notable backers.
Demonstrating Sword’s success is likely crucial for the company, given its direct competition with another virtual therapy platform, Hinge Health, which received an evaluation of $6.2 billion in October 2021. Hinge decided to lay off 10% of its workforce in April as part of its strategy to achieve profitability and potentially go public.
Bento is also aiming for an IPO for Sword. According to Bento, the company may consider listing in 2025 if it experiences the anticipated growth and if the macroeconomic conditions remain positive. However, Bento emphasised that the company has not made a firm commitment to a specific timeline.
Meanwhile, the company is strengthening its AI capabilities. The company is now introducing a new addition to its GenAI lineup: Phoenix, a voice that closely resembles that of a human. They’re integrating this advanced feature into both their musculoskeletal therapy and women’s pelvic health care therapy. Phoenix powers all patient interactions with Sword’s virtual therapists. “It’s the final element that adds a captivating touch to Phoenix,” Bento remarked.
