Sword Health rolls out new AI tech, banks financing round that boosts valuation to $3B

Sword Health, a virtual provider of musculoskeletal care, banked a financing round of $130 million in a mix of primary and secondary sale, boosting its valuation to a reported $3 billion.

The company says its valuation has grown 50% from its series D round in 2021, when it was valued at $1.8 billion.

Virgilio "V" Bento, founder and CEO of Sword Health, told Fierce Healthcare that $100 million of that financing round will provide liquidity to current and former employees and early investors. Of the round, $30 million is a primary sale.

"We don't need to raise money because we have a very strong cash position and we are converting very fast to profitability," Bento said in an interview. "I think it was important to send a signal to the market about our goals. And promise as a company that's abolishing epoxy. We are going fast with the investment plan and don't need to spend more to accomplish our goals."

This round brings the company's total funding to $340 million to date.

Sword Health did not disclose investors in this latest financing round but confirmed it was a mix of new and current investors. Investors in the company's series D round include Sapphire Ventures, Sozo Ventures,  Willoughby Capital, General Catalyst and Khosla Ventures.

A secondary sale typically occurs when a startup has achieved significant revenue or traction or, in some cases, is on the way to an initial public offering or a major sale. Given the IPO freeze in the digital health and health tech market in the past two years, startups are staying private longer and early investors and employees can't get liquidity for their shares.

Sword Health says it nearly tripled its revenue in the past year.

Asked about plans to go public, Bento said the company "has been thinking about" an IPO but doesn't have a specific date in mind.

"It will not happen before the second half of 2025," he said.

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The company announced its latest tech update, Phoenix, what it calls the next evolution of Sword's AI Care platform.

The company, which was founded in 2015, designed its digital MSK platform based on a foundation of world-class clinicians and then built in the expansive power of proprietary AI to deliver customized care to patients from their homes, according to executives. Sword’s virtual MSK solutions include its hallmark product called Digital Therapist, which lets members connect with physical therapists and track their progress with wearable motion sensors and a personalized artificial-intelligence-powered exercise program.

Clinicians design and guide custom programs and Sword Health's proprietary FDA-listed technology provides real-time feedback during every session, ensuring proper form and driving best-in-class outcomes, the company says.

The use of AI technology makes MSK care more accessible and scalable and can provide personalized treatment to members.

Phoenix combines AI and human clinicians to guide and react to members during their sessions through natural conversation. 

Phoenix, named for its ability to get members back to living healthy lives, will be integrated across the Sword platform, starting with Thrive, its digital physical therapy solution, and then into Bloom, its women’s pelvic health care solution, in the coming months.

"We've been working on these solutions since we started. Our vision was always to build a human-like AI solution that would allow patients to recover and access care at home independently. We replicate the experience that you have when you interface with a human specialist," Bento said. "Because of the advances in AI with generative AI and with LLMs, that basically accelerated our timeline and we were able to get there much faster than what we initially thought."

The company's first solution was one-directional and provided simplistic feedback, Bento said. With its latest AI tech upgrade, the platform is now bi-directional and incorporates feedback to the user and adjusts the program, he noted.

"An analogy would be like comparing a BlackBerry with an iPhone in terms of sophistication," he added.

The use of generative AI and LLMs enables the Phoenix technology to engage the members in dialogue in real time to assess how they are feeling, suggest changes to the session and provide motivation, according to the company. Phoenix can monitor members' progress through their program while factoring in their verbal feedback. This allows Phoenix to assist in providing optimal treatment within the human clinician’s pre-set program parameters.

After each session, Phoenix summarizes the patient’s performance data to identify trends and surface actionable insights and recommendations for the human clinician.

Approximately 1.7 billion people suffer from MSK conditions, according to the World Health Organization, making them the leading contributor to disability across the globe. Sword Health started with a focus on back, joint, and muscle pain and has expanded to women’s pelvic health issues and sedentariness.

The company says it has delivered three million AI sessions to members, to date, and it's available to over 10,000 employers across three continents. The company boasts that it holds 37 patents and has the only FDA-listed products in the market. Its clients are a growing list of employers and health plans including Cisco, Domino’s and Highmark. 

"The launch of Phoenix represents the largest leap forward of our model to date, and we’re very excited about the impact it will have on how the world accesses and receives care,” Bento said. “With more than three million AI sessions delivered to date, we’ve proven that our AI Care model is able to deliver on our initial vision of using AI to make access to high-quality care readily available, removing barriers to access to care, while cutting millions of dollars in healthcare waste for our clients.”