We got an exclusive look at the presentation that had investors working over the holidays to invest $25 million in the latest startup tackling remote physical therapy

  • SWORD Health, a startup that provides remote physical therapy, raised $25 million in Series B funding from Transformation Capital and existing investors.
  • Founder and CEO Virgilio Bento said he struggled to contain investor interest in the round, which closed on Christmas Day.
  • We got an exclusive look at the presentation Bento used to win over his new investor and board member.
  • Visit Insider’s homepage for more stories.

On Christmas Day, Virgilio Bento had a lot to celebrate.

His company, SWORD Health, had officially closed its latest funding round on the holiday to the tune of $25 million. It was the maximum amount he wanted to raise for the company’s Series B that came less than a year after its public launch in the US. Transformation Capital led the round, which also included existing investors Khosla Ventures and Founders Fund.

SWORD Health is just one of several startups hoping to reimagine physical therapy for a virtual world. It uses motion-tracking technology paired with treatment plans from credentialed doctors or physical therapists to provide remote-first relief for patients experiencing musculoskeletal conditions such as neck or shoulder pain.

The startup launched in the US in January 2020 after deploying its services in Europe and Australia, Bento told Insider. The timing, just prior to nationwide lockdowns in the US meant to contain the spread of the coronavirus, was both a benefit and a challenge, Bento said.

At first, the company grew rapidly as more patients were shut out of traditional physical therapy clinics. Shortly after, companies began reviewing the benefits they offered in the name of cost-cutting and SWORD, which makes profits based on large contracts with employers, suffered.

“COVID was a tailwind because it reinforced the need for patients to receive care at home, but it also had headwinds,” Bento said. “The self-insured employers stopped their search for new solutions, so there was a deceleration in the second quarter.”

Once the dust had settled, however, SWORD rebounded and then some, Bento said. The resulting growth, which Bento said includes the company’s 75% success rate in signing deals with companies they’ve pitched, was what caught investors’ eyes when he started thinking about ways to sustain the growth beyond the coronavirus pandemic.

“We saw this big growth in the third and fourth quarters, and we understood that the operational needs would require additional funding to deliver in the first and second quarters this year,” Bento said. “We knew we should raise again by the end of the year, and we took that decision forward in a very fast process.”

Bento is based on Portugal and met with investors entirely remotely in what he called an “incredibly efficient” fundraising process. Although he said he missed the face-to-face time with his new lead investor, Transformation Capital, he predicted that he would replicate the earlier stages of the process even in a post-COVID-19 world.

SWORD Health  shared a copy of the presentation it used to win over investors remotely to raise $25 million in Series B funding. 

SWORD Health is a startup that provides virtual physical therapy care.

Founder and CEO Virgilio Bento focused on reinventing technology for physical therapy while he was getting his doctorate in electrical engineering. He had witnessed the industry's stagnation and low-tech solutions after his brother woke from a 12-month coma and required physical therapy care.

Private investors have been keen to invest in startups like SWORD, which are typically referred to as MSK companies. Bento said the interest is a result of increased spending and rising costs in the industry.

SWORD Health works with insurance companies and employers to provide care to employees at no cost to them. It earns money through its contracts with employers. The below slide highlights the range of expenses self-insured employers take on, with musculoskeletal care ranking higher than mental health and cancer care costs combined.

SWORD Health uses motion-tracking devices to monitor patients' progress virtually. The remote monitoring aspect has been a key area of investment for VCs during the coronavirus pandemic.

SWORD Health patients have access to credentialed doctors and physical therapists to address a range of physical therapy conditions, such as neck or wrist pain. Bento said it is one of just a few companies that can compete with what he called the "gold standard" of in-person physical therapy.

SWORD Health first launched in Europe and Australia prior to entering the US market in January 2020. Bento declined to specify its valuation or number of customers in the US.

SWORD competes with companies like Hinge Health, another MSK startup that has been popular with VCs. Bento said that SWORD's differentiating factors are that it treats multiple conditions instead of focusing on just a few and that it works with licensed doctors and therapists instead of nondescript health coaches. Hinge Health is modeled similarly, but primarily focuses on chronic back and joint pain compared to SWORD's wider range of conditions.

Bento said that, when compared to in-person physical therapy, SWORD Health patients recovered 8 weeks faster on average in a company-published study. He said it could be due to the relatively flexible nature of remote care that patients can easily fit into their schedules.

You can find the full study here.

The company is eyeing other areas of growth, Bento said, that could benefit from the technology he has developed. That was a key reason he decided to work with Transformation Capital, he said, which could help identify new areas for SWORD to grow into.

Bento said he wanted a lead investor on the round that had expertise in the industry and could help the company grow as a board member. Currently, SWORD serves a wide range of patients, whether they are rehabbing in post-operative care or managing chronic conditions. He said he knew Transformation Capital was a good fit when he left the meeting having learned something new instead of having to educate VCs on his company's market.

Bento said he pitched up to 10 investors a day during the fundraising process, which he conducted entirely remotely. He said it helped make the process more efficient, but he missed the in-person aspects of getting to know major investors and adding the "human touch" element to the pitch process. In his virtual presentation, Bento opted to include testimonials from SWORD patients to help prove the personalized impact SWORD has had on their lives.

He said his existing investors, such as Khosla Ventures and Founders Fund, were eager to invest above their pro rata rights after having seen the outcomes from the time it had operated in the US.

Even as a young company, SWORD's retention and engagement have remained high among its patients, but also his investors. Bento said the most challenging part of the fundraising process was getting all the investors on board with a lower round. The only new investor was Transformation, he said, because the existing investors easily filled the remaining positions in the round.

To date, SWORD's outcomes have been favorable both to patients and their employers. By decreasing pain, time in surgery, and other factors related to musculoskeletal pain, SWORD also saves companies money by boosting employee productivity.

"You are working through this rollercoaster of starting a company with this person," Bento said. "Spending time with leading investors is important, and I missed that."

Bento said he is actively looking at ways to grow SWORD Health's services by broadening the scope of what its therapists can treat, but also in adding tools for the companies it works with to better manage costs associated with musculoskeletal care.

Transformation Capital managing director Todd Cozzens joined SWORD Health's board of directors as part of the funding round. The executive team has several digital health industry executives, including former employees at Virta Health, Artemis, and Rally Health. Bento has also brought on senior leaders from buzzy tech companies like Airbnb and Uber to help SWORD grow quickly.

Bento said the market for virtual musculoskeletal care is at an inflection point, and VCs are betting on which companies they think could win a majority of that market in the coming years.

“Digital

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