Sword Health Delays IPO to 2028, Raises $40M for AI Expansion and Strategic Acquisitions

Sword Health, a 10-year-old AI-powered digital health startup, has raised $40 million at a $4 billion valuation, a 33% increase from its $3 billion valuation just a year ago. The funding was led by returning investor General Catalyst, with participation from Khosla Ventures, Comcast Ventures, Lince Capital, Oxy Capital, Armilar, Indico Capital, and Shilling.

Despite being cash-flow positive, Sword Health's CEO and founder, Virgílio Bento, opted to raise additional capital for two key reasons: to update the company's valuation and have funds readily available for strategic acquisitions. The startup, which started as a virtual physical therapist and has since expanded into offering pelvic health and mental health services, had previously considered a near-term IPO. However, Bento is now reconsidering his plans, stating that an IPO will likely occur in 2028 rather than 2025.

Bento's goal is for Sword's AI care specialist, Phoenix, to extend remote healthcare beyond musculoskeletal pain and pelvic floor care to numerous conditions such as cardiovascular care, gastroenterological health, and speech therapy. He has embarked on an "educational journey" to learn about managing a public company and has spoken with CEOs of various public companies and bankers.

Bento is not convinced by the typical reasons for an IPO, such as brand building or capital access. He points to successful private companies like Ikea and Lego as examples of how strong startups can still secure ample private capital. He also notes that liquidity for employees and early shareholders is easily attainable for private companies thanks to secondary markets. Sword will likely launch a tender offer next month.

Bento predicts that Sword will raise more capital next year, with a valuation of $5 billion. "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."

With this latest round of funding, Sword Health's total funding now stands at $380 million. The company's expansion into new care verticals and its focus on remote healthcare are expected to drive further growth and innovation in the digital health space.