Sword Health Raises $40M, Expands into AI-Powered Mental Health Care

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

Sword Health, an AI-powered digital health startup, has raised $40 million at a $4 billion valuation, a 33% jump from the $3 billion price tag it earned just a year ago. The funding was led by returning investor, General Catalyst. Even though 10-year-old Sword Health is cash-flow positive, its CEO and founder, Virgílio Bento, told TechCrunch that he opted to raise additional capital for two key reasons: to update the company's valuation, and have funds readily available for strategic acquisitions. Sword Health, which began as a virtual physical therapist and has since expanded into offering pelvic health and mental health services, had previously considered a near-term IPO. Bento told TechCrunch last year that a 2025 listing was a possibility. Despite the recent successful IPOs of counterparts Hinge Health and Omada, and Sword's healthy $240 million annual revenue run rate, Bento is reconsidering his IPO plans. "It's going to be much later than everyone expects," he said. Bento's goal is for Phoenix, Sword's AI care specialist, to extend remote healthcare beyond musculoskeletal pain and pelvic floor care to numerous conditions, such as cardiovascular care, gastroenterological health, and speech therapy. "I want to IPO when I have lots of different proof points at scale in many different care verticals -- so maybe 2028," he said. In recent months, Bento has embarked on what he calls an "educational journey" to learn about managing a public company, speaking with CEOs of various public companies and bankers. "At the end of that education period, I realized that if you ask me why we shouldn't IPO, I can give you 10 reasons. If you ask me why we should IPO, I cannot find one reason," he said. Bento isn't convinced by the typical reasons for an IPO, such as brand building or capital access. Pointing to Ikea and Lego as examples of successful private companies, he said strong startups can still secure ample private capital, citing Databricks' massive $10 billion raise. Liquidity for employees and early shareholders is also easily attainable for private companies thanks to secondary markets, Bento said, adding that Sword will likely launch a tender offer next month. Sword expects to raise more capital next year, Bento said. He's even predicting the size and valuation of the company's 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 said. "I like the numerical symmetry. I think it's fun." The latest round brings Sword's total funding to $380 million. Other participants in the new round include Khosla Ventures, Comcast Ventures, Lince Capital, Oxy Capital, Armilar, Indico Capital and Shilling.

Pain management startup Sword Health expands into mental health, raises $40 million

A patient uses Mind from Sword Health.Courtesy of Sword Health Sword Health, a startup focused on helping people deal with pain through digital services, is expanding into mental health and has raised additional capital to fuel its growth. The 10-year-old company is introducing Mind, which uses a combination of artificial intelligence, hardware and human mental health professionals to treat patients with mild depression and anxiety. Sword said Mind will help users access care whenever they need it, rather than during sporadic, hourlong appointments. "It's really a breakthrough in terms of how we address mental health, and this is only possible because we have AI," Sword CEO Virgílio Bento told CNBC in an interview. Also on Tuesday, Sword announced a $40 million funding round, led by General Catalyst, in a deal that values the company at $4 billion. The fresh cash will support Sword's efforts to grow through acquisitions, as well as its global expansion and AI model development, the company said. The round included participation from Khosla Ventures, Comcast Ventures and other firms. Sword had raised a total of more than $450 million as of September, according to PitchBook. The financing lands as the digital health market shows signs of recovery following a difficult post-Covid stretch, when rising inflation, higher interest rates and a return to in-person activities led to a dramatic retreat in the industry. Earlier this month, Omada Health, which offers virtual care programs to supports patients with chronic conditions such as diabetes and hypertension, held its Nasdaq debut, though the stock is trading below its initial public offering price. Weeks before that, digital physical therapy provider Hinge Health hit the New York Stock Exchange. The shares are trading a few dollars above their offer price. Sword, which was founded in Portugal and is now based in New York, offers tools for digital physical therapy, pelvic health and movement health to help patients manage pain from home and avoid other treatments such as opioids and surgery. Patients can sign up for Sword if it's supported by their employer or their health plan. Mind users will receive a wrist wearable called the "M-band" that can measure environmental and physiological signals such as heart rate, sleep and the lighting in a user's environment. Mind also includes access to an AI Care agent and human mental health professionals, who can deliver services such as traditional talk therapy. Bento said a human is always involved with a patient's care, and that AI is not making clinical decisions. For example, if a patient has an anxiety attack, Sword's AI will recognize that and could ask a clinician to approve some physical activity for later that day to help with recovery. The clinician would either approve the physical activity that the AI suggested, or override it and propose something else. "You have an anxiety issue today, and the way you're going to manage is to talk about it one week from now? That just doesn't work," Bento said. "Mental health should be always on, where you have a problem now, and you can have immediate help in the moment." Bento said Sword has some clients that have been on a waiting list for Mind, and the startup has been testing the offering with some of its design partners. He said early users have approved of Mind's personalized approach and convenience. "We believe that it is really the future of how mental health is going to be delivered in the future, by us and by other companies," Bento said. "AI plays a very important role, but the use of AI -- and I think this is very important -- needs to be used in a very smart way." Disclosure: Comcast, the parent of Comcast Ventures, is the owner of NBCUniversal, parent company of CNBC.