Sword Health, an AI-powered virtual physical therapy startup, has raised $30 million and allowed employees to sell $100 million worth of equity to new and existing investors, including Khosla Ventures.
This round brings the nine-year-old company’s valuation to $3 billion, a 50% increase from the $2 billion valuation during its Series D in November 2021.
Initially, the company planned only a $100 million secondary round to let employees and early investors sell shares, CEO and founder Virgílio Bento told TechCrunch.
However, due to oversubscription, the company also decided to raise a $30 million primary round and update its valuation.
“It’s a very intense environment with long hours and high expectations. We wanted to reward our team, especially our early employees,” Bento said.
Sword didn’t need the additional capital as it expects to be profitable by the end of the year. However, Bento appreciated the signal an updated valuation would send in the challenging fundraising conditions of 2024.
“No one really believes in the valuations of 2021 given how irrational the market was,” Bento said. While most employees know the company is doing well, Sword’s clients, including employers and health plans of Fortune 500 companies, lacked a clear way to gauge the company’s progress. “We wanted to showcase our growth, and valuation is one indicator of that.”
The $30 million won’t be used for operations but will be kept in the bank to generate interest, Bento said.
This primary round brings Sword’s total funding to $340 million. In addition to Khosla Ventures, investors include General Catalyst, BOND, Founders Fund, and others.
Sword Health competes directly with another virtual therapy platform, Hinge Health, last valued at $6.2 billion in October 2021. In April, Hinge laid off 10% of its workforce to prepare for potential profitability and an IPO, TechCrunch reported.
Bento also aims for an IPO for Sword Health. If the company grows as expected and the macroeconomic environment is favorable, it could potentially list in 2025, though there is no specific timeline yet, Bento said.
Meanwhile, Sword is enhancing its AI capabilities. It is introducing a human-like voice for its genAI, named Phoenix, to its musculoskeletal and women’s pelvic health care therapy. Phoenix powers all patient interactions and virtual therapists. “It’s the last piece of the puzzle that makes Phoenix much more engaging,” Bento said.
