While the company itself wasn’t legally formed until decades later, Sword Health’s origin story begins on June 8th, 1994.

That was the day that Virgilio “V” Bento’s 12-year-old brother was hit by a car on his way back from school in their hometown in Portugal. Bento told this story in a TEDx talk back in 2013 (the talk was in Portuguese but the excerpt below is the English translation that the event provided):

From then on, physical medicine and rehab were a fixture of Bento’s childhood. His parents came to believe that maximizing the intensity of his brother’s treatment was the key to a fuller recovery. Bento said his parents spent 10 years supplementing the care of physical therapists and occupational therapists by working with their son at home. After the first year of rehab, Pedro had recovered enough to attend school again. He continued treatment in Portugal for another two years before Bento’s parents made a decision:

When Bento gave this talk in 2013 he had recently completed his PhD in Electrical Engineering — a course of study that he has since said he only pursued to unlock grant funding so that he could develop a better, more scalable way to help people who need rehab.

During his doctorate studies, Bento teamed up with a neurologist named Vitor Tedim Cruz, who practiced at Santa Maria da Feira Hospital, along with two other students — Marcio Colunas and David Dieteren — to form a short-lived company in 2013 named EndeavourLab. Endeavour’s first project, which the group had actually begun working on as early as 2008, was a technology named the Stroke Wearable Operative Rehabilitation Device.

Or… S.W.O.R.D. for short.

Before beginning my research for this report, I considered Sword to be a relative newcomer — a fast follower of Hinge Health. That’s true in some ways, but the company is among the oldest digital health companies still in operation today.

Bento often claims that Sword Health didn’t enter the US market until 2020 (that’s not precisely true, as we’ll discuss later on), but he published his first paper about the technology that serves as the foundation of Sword back in 2011 — the same year pioneering digital health companies like Omada Health got their start. So while Sword didn’t get traction until the early months of the COVID–19 pandemic, the company had been in R&D and iterating for nearly a decade before then.

Before digging into more of Sword Health’s early days, let’s take a look at the company’s recent growth metrics — starting with its annual revenue, which is set to hit $200 million in 2023.

Sword Health’s Growth Metrics

The revenue figures above are not E&O’s estimates. During a recent on-stage interview at an event hosted by Khosla Ventures, which is a longtime backer of Sword Health, Vinod Khosla rattled off the revenue numbers above as part of his opening remarks before a sitdown interview with Sword Health’s CEO and founder V Bento. Khosla said that while Sword had originally projected 2023 revenues at $193 million, Bento told him just before the event that the company was on track to exceed that number.

2018 revenue: The Sword Health we know today really didn’t officially launch in the US until early 2020, but the company did bring in some revenue in the years prior to that. In 2018, for example, Sword Health managed to bring in north of $700,000 in revenue with a $ 210,000-a-month burn rate. Its customer mix at the time included employers, payers, and workers comp.

R&D phase or just slow growing? Considering the company only brought in $2 million in 2020, it’s likely 2019 brought in between $1 million and $2 million. Since the company didn’t really hit its growth stride until 2020-2021, it makes sense that the company refers to the time period prior to 2020 as its overly long R&D stage. Yes, the company was iterating and figuring its go-to-market out, but it wasn’t only focused on R&D — it was attempting to sell.

Sword Health had a handful of customers in 2018 and 2019, but the number grew to 150 customers by the end of 2021. In September 2022 the company announced a staggering increase in its customer count, which went from 150 to more than 1,400. The company told me it now has more than 2,500 “enterprise clients” with access to at least one of its programs.

Sword vs Hinge customer counts: Customer counts in digital MSK are one of the key public metrics that companies willingly share. It’s unclear if there is some wiggle room as to what constitutes a customer, however. By most measures, Hinge Health is still a bigger company than Sword Health — but Hinge Health only claims to have more than 1,500 customers. It recently updated its website. It previously stated that its program was available to employees at 1,250+ companies to 1,500+. Sword doesn’t use the word “employer” when referring to its customers, so it may have a more inclusive way of counting total customers, which would make it difficult to compare its counts to Hinge’s.

ACV and customer counts: In its early years, Sword Health said that its average contract value was $125,000. That was loosely based on an employer with 5,000 employees and a 4 percent engagement rate. If Sword Health’s customer count from 2022 reflects the number of active customers deploying its offerings in 2023, then we get 1,400 x $125,000 = $175 million in revenue for 2023, which isn’t too far off from what Khosla projected, as documented above. That suggests the company’s ACV for 2023 was higher than it was in the early days — closer to $142,850.

Projecting 2024 revenue based on customer counts: Of course, those numbers also could help us project 2024’s revenue. With 2,500 customers x $142,850 = $357 million.

Sword Health’s timeline of funding rounds: Here’s a quick run-down of Sword Health’s funding events since its earliest year and up through its last funding round in 2021.

• March 2014: $160,000 from BrainCapital
• March 2015: $266,000 from BrainCapital and New Ventures
• July 2015: $1 million grant from the European Commission
• September 2015: $426,000 from Change Partners
• April 2019: $8 million Series A led by Khosla Ventures
• February 2020: $9 million extension of Series A led by Khosla Ventures
• January 2021: $25 million Series B led by Transformation Capital
• June 2021: $85 million Series C led by General Catalyst
• November 2021: $163 million Series D led by Sapphire Ventures

2008 – 2015: Early years of S.W.O.R.D., aging in place, and pet trackers

As noted in the intro section above, the academic project S.W.O.R.D. and the subsequent startup’s earliest iteration were created by four students in Portugal. While Bento and Marcio Colunas would go on to lead Sword Health as CEO and CSO, respectively, the other two departed the company by the end of 2015.

Publish or perish: During these early pre-commercial years, the team of researchers conducted a number of studies and published a handful of papers in various journals — culminating in a paper published in Nature Scientific Reports in 2014: Motor task performance under vibratory feedback early poststroke: single-center, randomized, cross-over, controlled clinical trial.

First funding: Around the time of that publication, the startup secured its first $160,000 funding injection from outside investors, BrainCapital in early 2014.

Aging 2.0: By the end of that year, Sword announced that San Francisco-based Aging 2.0 had picked it along with 19 other startups for a year-long accelerator program for companies focused on the “aging and long term care sector”. Unclear if Sword went along with this, but the Aging 2.0 program typically took a 2 percent to 3 percent equity stake in its startups. Here’s how Aging 2.0 described SWORD at the time:

Selling software+hardware to rehab centers: By the end 0f 2015, this Aging 2.0 program along with the organization’s annual event where the SWORD team got some stage time led to the startup’s first commercial activities in the US. It partnered with Genesis Rehab Services, which at the time operated more than 1,500 rehab centers in the US and abroad, and began setting up “SWORD-enhanced centers” in the US and in China. Sword also managed three more funding wins in 2015: Another $266,000 from BrainCapital; a $1 million grant from the European Commission; and $426,000 from Change Partners.

International from the start: At this time Sword considered itself a digital motor rehabilitation therapy company that sold its hardware and software to clinicians and rehab centers. Its business model at the time included a license fee per patient active in the system via an annual contract plus a rental fee per set of hardware. It worked with rehab centers in Portugal, China, Sweden, Belgium, Italy, and the US. The company adjusted its prices based on the national health system.

Sword Phoenix: After dropping the early acronym S.W.O.R.D. branding, by 2015 Sword Health referred to its program as Sword Phoenix. The slide above is a quick summary of the offering’s components. It’s clearly pitched at providers — “clinical teams and decision-makers”.

Sword Care for fall prevention: In late 2015 Sword mocked up a site for a new program focused on seniors fall prevention that it had branded Sword Care. Based on the program’s proposed tagline, the company planned to sell the program to senior housing facilities and long-term care centers for the elderly: “Increase the safety of your residents and remove the cost of falls from your spreadsheet.” (Sword Care for fall prevention never launched as a standalone program, but the company’s current service line named Sword Move does call out fall prevention as an aim.)

Findster, a DTC crowd-funded pet tracking distraction? One of the weirder footnotes from the early years of Sword Health was that Bento and Colunas simultaneously helped start up a company called Findster that offered a wearable device for pets that used a proprietary long-range wireless technology along with GPS to track lost pets (and later kids). An August 2014 TechCrunch article credited Bento as the inventor of the technology and the concept behind Findster, but he never ran the company. It raised hundreds of thousands of dollars via a couple of crowdfunding campaigns and supposedly did around $4.5 million in revenue in 2018 and was shooting for $10 million in 2019 (unclear if they hit that number) before apparently losing its momentum during the pandemic.

Findster seemed to wind down during the pandemic but much of its team and its assets re-emerged in January 2021 as a virtual veterinarian care company named Maven Pet. EX Capital, a venture fund run by Sword Health’s founding team, is one of Maven Pet’s investors — likely a result of the Findster asset transfer.

Notably, the fact that Bento and Colunas had a hand in starting up a somewhat successful DTC tech company that managed to drive revenues into the seven-figure range was one of the reasons that Sword Health’s first big-name investor — Khosla Ventures — decided to lead the company’s Series A round in 2018.

2016 – 2017: Sword iterations, Kinect fails, and the rise of Hinge Health

2016 iterations and experiments: Throughout 2016 Sword Health continues to try to build its business by selling to in-person rehab centers looking for a way to add remote care capabilities between their patients’ visits. Sword continues to use its Sword Phoenix branding for this offering but it also kicks around other ideas for product names. In September it floats the idea of naming the software (what it often refers to as its Digital Therapist) that powers the Phoenix program as Sword Arya, which I am guessing was a reference to the popular HBO TV show Game of Thrones. Aside from a single tweet, however, Sword Arya didn’t seem to get any traction. The company also branded an offshoot of its core program as Sword Play, which was targeting upper limb motor issues. Again, I don’t see any evidence a program with that branding ever really got into the hands of paying customers.

Market changes in 2017: Arguably, 2017 is the year that everything started to change for digital MSK. While Sword Health never used Microsoft’s motion detection tech, Kinect, to power its musculoskeletal rehab program, most of Sword Health competitors at the time did. Here’s a slide from 2016 that Sword Health put together:

In October 2017 Microsoft announced that it was shutting down Kinect, which left many of these company’s in the lurch. While it wasn’t immediate for every MSK company using Kinect, most of them ended up shutting down before long. As Bento tweeted in response to the Microsoft announcement:

But just as the competitive field for Sword Health seemed to be clearing, a new market leader landed in the US from the UK: Hinge Health. Hinge began racking up self-insured employer customers soon after it launched its health coach + technology-enabled program in early 2016. By August 2018 it had a few dozen employers as customers, which grew to more than 100 customers in 2020 when Sword finally pivoted and started courting employers and health plans too. (Read all about Hinge Health’s early years in E&O’s The Hinge Health Report focused on them, which published back in early 2020.)

Sword and just about everyone who has worked in digital MSK are quick to give Hinge Health credit for educating the market. Hinge Health had clear first mover advantage and has taken advantage of it. One of the things that Hinge recognized (beside self-insured employers as a ripe go-to-market) was that the digital MSK technology alone wasn’t a sufficient sell. Hinge also built a staff of health coaches to guides its program participants. In addition to these two insights — and perfect timing — Hinge was impressively aggressive with its marketing and sales playbook.

2018-2019: Sword Health’s big pivot into a virtual clinic

Despite the death of Kinect and the rise of Hinge Health, Sword’s positioning was still more or less unchanged through the end of 2018. The company, however, had begun its big pivot into the Sword Health we know today. Here’s how Sword Health pitched Sword Phoenix in December 2018:

By February 2019, the company dropped “Phoenix” and tweaked its one-line pitch to this:

Then, in June 2019 the company makes clear that it is pairing its tech with its own clinical teams:

Late 2018: At the end of 2o18, Sword Health raised $8 million in venture capital led by Khosla Ventures, which was the first time the company landed a big-name Silicon Valley backer. (The news didn’t break until April the following year.) Sword began to set up clinical trials in late 2018 so that it could, according to its Series A deck:

Early 2019: In March 2019 Sword Health set-up its first virtual clinic. This move was a major divergence from its competitor Hinge Health’s model at the time. Sword would go on to form virtual clinics (PCs and PAs) in various states in order to blanket the country with virtual medical practices that could care for patients in any state.

Early 2020: By February 2020, when Sword announced a Series A extension of another $9 million from Khosla Ventures and Founders Fund, Sword’s virtual clinic model was up and running. Here’s how it described itself at the time:

Sword Health during the pandemic: Just about every digital health business with a remote care component experienced unprecedented tailwinds during the COVID pandemic. Sword was no exception. Sword Health CEO V Bento even tweeted about it around the time it apparently occurred to him that his business was about to change substantially:

From here on out Sword Health’s core go-to-market strategy didn’t change much, but it had entered into a competitive environment seemingly dominated by one company: Hinge Health.

Sword Health’s early sales strategy and how it competed against Hinge Health

Jumbo employers vs SMBs: When Sword Health first launched its virtual clinic-powered MSK offering in January 2020, Hinge Health was already signing up large self-insured employers at a good clip. Sword probably didn’t go after any of Hinge’s current customers since they were probably locked into three-year agreements already, but it didn’t ignore the self-insured employer market either. The first big employer account that Sword landed was Pepsi. Sword’s sales team could point to Pepsi as peer validation when pitching other jumbo employers. Today, Sword Health’s programs are available to more than 6 million people, including employees at big companies like Danaher, Cisco, Domino’s, and more.

While most employer-focused digital health companies focus on self-insured employers early on, Sword Health decided to also target small employers.

Signing up smaller employers was a quicker sale and could help the sales team rack up testimonials and hopefully more benefits brokers who could act as advocates for Sword with their other employer clients. Even though these accounts were less lucrative, they helped Sword boost their number of customers, which was (and remains) one of the few metrics that both Hinge Health and Sword Health share often and publicly. As noted in the metrics section above, in less than a year Sword jumped from 150 customers to more than 1,400. That jump was partially thanks to an influx of smaller customers.

Virtual clinic model unlocks different customers: Sword Health’s marketing consistently hammers away at the messaging that Sword only uses licensed physical therapists — Doctors of Physical Therapy — and not health coaches. When Sword Health entered the market Hinge Health only used health coaches. This was still true in April 2020 when E&O published The Hinge Health Report. In it, I wrote:

Sword Health’s virtual clinic (MSO+Friendly PC) model made it attractive to Medicare Advantage plans and other payers’ fully-insured business units. Like so many virtual clinics do today, Sword recognized back in 2019 and early 2020 that it could contract with these payers as a virtual in-network provider.

Once Sword Health started to win customers, Hinge Health added Doctors of Physical Therapy into its program as supervisors, but health coaches are still a key part of their core programs. As the social media post above makes clear, Sword Health remains aggressively anti-health coach.

How Hinge has pushed back on Sword Health’s pitch: By 2022 Hinge Health had formulated a solid counter pitch to Sword Health, and  — as far as I can tell — Hinge remains the bigger company by just about every metric. Hinge has found a number of areas to focus on to poke holes in Sword’s pitch, including a focus on “no co-pays” for Hinge Health’s services. Here’s an excerpt from an RFP that Hinge Health put together at the beginning of 2022 that is clearly an articulation of its value prop vs a company like Sword:

How Sword is taking back digital “physical therapy” from the coaches: Without a doubt the coach vs licensed PT drama reached a fever pitch in 2022 when the American Physical Therapy Association sent a letter to UnitedHealthcare demanding that it stopped referring to its partner Kaia Health’s digital MSK programs as “physical therapy” since it did not use licensed physical therapists. Here’s a snippet from the APTA’s announcement about the episode:

Sword Health announced a collaboration with the APTA earlier that year.

To get a better sense of how Sword emphasizes its care providers in its sales pitch, here’s how Sword explained its company’s unique attributes in an RFP from 2021:

More comprehensive care: Another front that Sword Health focused on to try to win customers over Hinge Health was over how comprehensive Hinge Health’s program was vs Sword Health’s. Sword claimed at launch in January 2020 that it had validated programs focused on hip, lower back, shoulder, neck, and knee pain. In October 2020, Sword added a care pathway focused on wrist pain less than a year after launching. In its first year of selling, Sword raised questions with customers about whether Hinge Health’s shoulder program was fully baked.

Technology: Sword Health used to try to make the case that its technology was superior to its competitors more frequently in its early years, but it seems like it stopped emphasizing this in recent years. Given the many years that Sword’s founders spend in the R&D phase, it makes sense that Sword would tout this as one of its competitive edges. Here’s how it described its tech in 2021:

Pricing in three tranches: Finally, Sword Health implemented a pricing model based on three milestone payments for each engagement patient. Typically, this triggers payment from the customer at enrollment, after the patient completes the third exercise therapy session, and after the patient completes their ninth session — as detailed in the section below. Before Sword Health launched, Hinge charged one fee at the time of enrollment — typically around $995 per participant. As E&O reported back in 2021, Hinge Health adopted a three-tranche payment system like Sword’s — maybe a year after Sword’s launch.

Sword Health Pricing and Guarantees

As noted above, pricing for Sword is typically broken up into three tranches:

I’ve yet to find a pitch or a contract where Sword charged more than $950 per participant. I’ve seen a few that were lower — they sometimes go as low as $850 per participant, but never at the $1,190 price tag the company seems to be referencing above.

Performance Goals: Sword Health typically includes three money-back guarantees as part of its contracts:

Outcomes Sword Health shares with customers

I’m always surprised by the range of outcomes that digital companies share with their customers. In this case, I was surprised to see that Sword Health regularly shares outcome measures focused on anxiety and depression — even though they are focused on digital MSK and physical pain. This slide is from a few years back:

In an RFP from 2021, Sword Health shared a longer list of outcomes it tracks internally for each customer deployment:

• number of employees/members enrolled vs total eligible
• Pain reduction
• Surgery utilization reduction
• Medication consumption (opioid) reduction
• Depression reduction
• Anxiety reduction
• Work productivity gains
• ROI/cost savings
• Member satisfaction
• Member quotes and testimonials

Growing pains and management struggles

It’s fair to assume that any startup growing as quickly as Sword Health is an intense place to work, but it is rare that a founder/CEO admits that their management style has become an issue for their board. Bento has previously said that Sword has de-risked so much of the business and is at a growth stage now where the biggest risk is that it grows so fast that it “breaks apart.” There are, of course, many ways that might happen.

At an event hosted by Khosla Ventures earlier this year, Khosla Ventures founder Vinod Khosla interviewed Sword Health CEO V Bento on-stage and asked him to share about his recent disagreements with the board over setting high expectations for his management team — possibly too high? — and the fallout and departures that ensued.

Bento didn’t go into any particulars but you can get a good sense of the general vibe at Sword Health from his comments:

Bento said that’s also one reason why the company prefers to bet on its own people now and makes an effort to hire from within its own ranks for its leadership positions.

Sword Health will focus on physical pain for the foreseeable future

Sword Health’s current line-up of programs and offerings in mid-2023 includes the following:

Digital Physical Therapy: This is Sword Health’s flagship offering and what the majority of this report is focused on.

Bloom: In March 2022 Sword announced this new offering focused on women’s health. Here’s how it describes Bloom today:

Move: In November 2022 Sword announced this new program that is more focused on preventing MSK problems than treating them. It’s much more of a wellness offering:

Predict: In March 2023 Sword announced this new AI-powered program that aims to predict and prevent unnecessary surgery.

On-Call: In May 2023 Sword launched On-Call to give its patients on-demand access to its Doctors of PT anytime they needed to reach out for urgent care. Unlike the core offering, this is billed on an episodic basis like most telemedicine urgent care offerings. On-Call replaced a product that Sword launched in 2021 called Ask a PT, which was basically a text-based version of On-Call. More:

The Academy: Finally, Sword Health also considers its library of content, which it has branded The Academy as its sixth product. It’s referred to this as The Academy since at least 2021. More:

What’s next for Sword Health: Bento has scoped out Sword Health’s ambitions as focused on treating physical pain. When I asked him in a recent interview what an example might be of a medical issue outside of MSK that Sword is not treating today that would fall into this scope he said — migraines.

Bento said that Sword wouldn’t move deeper into opioid use disorder treatment even though pain medication reduction is one of the company’s current outcome measures that it tracks for customers.

Sword buys Swing? Just for fun, let’s end this report with some speculation. I wonder if Sword Health has considered a move into treating fibromyalgia. Notably, Swing Therapeutics recently secured its FDA market authorization for a digital therapeutic named Stanza that treats fibromyalgia pain. Swing has begun to set up virtual clinics, starting in Texas, to distribute its digital therapeutic and provide comprehensive care to fibromyalgia patients. I have to imagine fibromyalgia is on Sword Health’s roadmap, and, therefore, Swing seems like a potential acquisition target for Sword.