Sword Health Raises $40 Million Valuation Jumps 33% to $4 Billion

Sword Health, an AI-powered digital health startup, has recently secured $40 million in funding, pushing its valuation to $4 billion. This marks a 33% increase from its previous valuation of $3 billion just one year ago. The funding round was led by General Catalyst, a returning investor, demonstrating strong confidence in the company's growth trajectory. Despite being cash-flow positive, Sword Health's CEO and founder, Virgílio Bento, decided to raise additional capital to update the company’s valuation and build a financial reserve for potential strategic acquisitions. This move highlights the company's proactive approach to growth and market positioning, even from a financially stable position.

Sword Health had initially considered going public as early as 2025. However, Bento has since reconsidered this timeline, stating that the IPO would likely occur "much later than everyone expects," potentially pushing the date to 2028 or beyond. This decision comes after Bento's "educational journey" into the world of public companies, where he found compelling reasons not to rush into an IPO. He noted that he could easily list ten reasons against going public but struggled to find one compelling reason in favor of it currently. This strategic delay allows Sword Health to focus on expanding its AI capabilities and market validation across multiple health verticals before facing public scrutiny.

A core part of Sword Health’s strategy involves expanding the capabilities of its AI care specialist, Phoenix. Initially focused on virtual physical therapy, the company has already grown to include pelvic health and mental health services. Bento’s ambition is for Phoenix to extend remote healthcare support to a much wider array of conditions, including cardiovascular care, gastroenterological health, and speech therapy, among others. This focus on deep, multi-vertical expansion via AI health is a key driver behind the delayed public offering. Bento emphasized the need for “lots of different proof points at scale in many different care verticals” before considering an IPO.

Bento is not swayed by typical reasons cited for IPOs, such as brand building or access to capital. He points to successful private companies like Ikea and Lego as examples of strong brands built without going public. He also highlighted that robust startups can still secure substantial private funding, citing Databricks’ massive $10 billion raise as evidence. Furthermore, liquidity for employees and early shareholders, often a major driver for IPOs, is increasingly available through secondary markets for private companies. Bento indicated that Sword Health plans to launch a tender offer next month to provide liquidity options. This demonstrates that the benefits traditionally associated with public markets are becoming accessible in the private sphere.

Looking ahead, Bento is already anticipating the company’s next funding round. He predicts Sword Health will raise more capital next year, projecting a potential $50 million round at a $5 billion valuation. He humorously noted his fondness for the “numerical symmetry” in their funding progression ($30M at $3B, $40M at $4B, predicting $50M at $5B). The latest $40 million round brings Sword Health’s total funding raised to $380 million. Beyond General Catalyst, other investors participating in this round included Khosla Ventures, Comcast Ventures, Lince Capital, Oxy Capital, Armilar, Indico Capital, and Shilling, showcasing broad investor confidence in the company’s mission and growth potential.

Sword Health’s decision to secure significant venture capital and delay its IPO plans underscores a strategic choice to prioritize deep product expansion and market validation across multiple health verticals before facing public scrutiny. This approach allows them to leverage private funding and flexibility to build a more comprehensive and robust AI health platform, aiming for long-term, sustainable growth.