CEO of Sword Health: Virgílio Bento

Virgílio, it's good to see you. Excited to have you on this podcast. I wanted to start this conversation about the prehistory. What have you been doing before Sword Health and how did you come up with the idea?

I started developing the technology behind Sword during my PhD in electrical engineering. The reason I focused on building this technology was because I felt the challenges families face when recovering a loved one. I saw it with my brother and the challenges my parents faced. When I started my PhD, the goal was to get funding to develop the technology. In Europe, especially in Portugal, it was impossible to get investment just with an idea. So, I wrote a research grant that was approved, and the PhD was an unintended consequence of getting the funding needed.

So you spent four years raising grants before getting it to the market?

Yes, my first development happened during my PhD with a research grant of roughly $100,000. We had IP, a technology, a product to demo, and clinical evaluation. This allowed us to get our first seed investment of $150,000, followed by $250,000, and then $400,000. We also got a $1 million research grant from the European Commission, which accelerated us. We were scrapping for any money we could get because of where we were born, but it made us a stronger company with a strong culture.

What was the product like initially, and how did your pitch change when raising grants versus seed funding?

It was a massive change. A research grant focuses on increasing knowledge, while startups focus on market access. During my PhD, I was precise about everything, but in the startup world, it's about approximations and de-risking market access. It took me years to adjust, especially in Europe where mentors are scarce.

How did you meet your first seed investor?

I did a TEDx talk about why we built what we built, and my personal motivations. That was the hook for him to approach me and say he wanted to invest. I was ecstatic because it was the first time someone wanted to invest in us.

Once you raised that funding, what did you do?

We hired more people to accelerate development. Initially, we deployed a solution for PT clinics, but realized we needed to become the provider to have the impact we wanted. We shifted from selling to providers to targeting the buyers who had the problem we were solving.

Did that require a lot of product change?

It wasn't a significant product change. We were already developing tools for an external clinical team, and now our internal team used them, which accelerated optimization and product market fit.

Was there a moment you realized you had product market fit?

Yes, when we launched in January 2020 and got our first client in May with a $1.5 million contract, followed by a $4 million client at the end of the year. Those were clear indicators of product market fit.

How did you meet Vinod Khosla?

I sent a cold email to Khosla Ventures, knowing they were contrarian and focused on science. Surprisingly, I got a reply, and after a few calls, they decided to invest. It was the first time someone saw our potential, and it changed everything for us.

After raising the round from Vinod, what were the next steps?

We set up a team in the US, and my first hire was a chief talent officer to help build the team. It was strategic to focus on talent rather than commercial or marketing officers. COVID allowed us to catch up and be ready for the market.

How did you meet your chief talent officer?

Through Khosla Ventures. Good VCs provide access to talent, which is crucial because our bottleneck is not capital but talent.

What's your philosophy on hiring early-stage folks versus established profiles?

I prefer hiring high-potential individuals who haven't yet proven themselves. They have the drive and energy to do their best work. Established profiles might not have the same drive. It's riskier, but when it works, it's highly rewarding.

How do you judge drive and skills in interviews?

I delve into specific projects they've led, peeling back layers to see if they were hands-on or just delegating. It's about understanding how they solve problems and their sense of urgency.

How did you grow from $2 million to $100 million in ARR?

We optimized our solutions based on client feedback and launched new solutions to expand our addressable market. We listen to our members and stay updated with scientific developments to connect dots and innovate.

How do you enable your team to listen to users?

Everyone has access to member feedback, and we foster a culture of experimentation and innovation. I personally talk to members weekly to understand what we can improve.

What should we expect in the next five years?

We aim to be the solution to pain, preventing problems before they occur. We want to be the first go-to solution for pain, moving away from surgeries and painkillers. It will take time, but that's our goal.

Incredible. Virgílio, thanks so much.

Thank you.