In this podcast, we connected with Virgilio Bento, founder and CEO of Sword Health, who is on a mission to free the world from pain.
How Virgilio built the technology behind Sword Health during his PhD in Electrical Engineering
Kyriakos: Let's start with the pre-history of Sword Health - what did you do before sword and how did you come up with the idea?
Virgilio: I started building the technology behind Sword during my PhD in electrical engineering. I focused my PhD research on building a technology to relief people from pain and people struggling with physical limitations. The reasons I focused on this was that I felt vividly when I was a young boy, the challenges that families face when they have to recover a loved one.
I saw that with my brother - I saw the challenges that my parents faced to deliver that kind of therapy to my brother and that stuck with me. That's why I started my PhD as the reason behind my PhD was to get access to the funding needed to develop this technology. Especially during this time ten or fifteen years ago in Portugal, it was almost impossible to get a $150,000 investment just with a simple idea. The only way I figured I could build this and get access to the funding was to write a research grant that was approved. The implication for that research grant was for me to get a PhD with it. In essence, the PhD was actually an unintended consequence of the main goal, which was to get access to the funding needed to develop the technology.
Early days of Sword Health — meeting Khosla Ventures and Series A funding round in Silicon Valley
Kyriakos: Could you take us through the early days of Khosla Ventures and how you were first introduced to Khosla Ventures?
Virgilio: I sent an email, so that comes down to how we raised our Series A. As I mentioned earlier — we went from angel investment to angel investment, to angel investment. Then it came to a moment when we thought, okay, we need to write a Series A to put together a commercial team and get into the market.
My first approach to this was, well, look, I would love to rise from a tier one VC firm in Silicon Valley, but I realized that I’m still a small startup in Portugal so let me raise the Series A from a tier two or tier three VC in Europe and then raise the Series B with commercial traction in Silicon Valley. This was the plan.
Then I spent five months in Europe meeting all of these VCs and getting a no by default in the first meeting. The goal of a fundraising process is you do the first meeting and the goal is to get the second one and then you get the third one, right?
Personally, I won’t go for the first question… Everyone was obsessed with the key question — what’s your commercial traction? And I was like, I don’t have any. I have an IP where we created this amazing technology that is unique to the world and this clinical validation that showcases that it works.
Those two things together, combined with this massive market, we will have something really valuable here. Then the VCs in Europe were like, yeah, sure, when you get that something valuable, come back to me and we will talk. So we were really at a dead end and running out of money
Then one night I sent a cold email to Khosla Ventures because I knew that they were contrarian and didn’t follow the herd because they didn’t have to see the commercial targets — they were thinking from first principles, science first. Secondly, they didn’t have to see which investors were already in the cap table before or which ones were leading the rounds.
I was really surprised to see that a couple of hours later I received a reply from Delian, who is now a partner at Founders Fund but was a principal at Khosla Ventures at the time. He said he was really interested in this and wanted to schedule a call the next day. This was the first time the investor on the other side had actually read our clinical papers and wanted to discuss the clinical papers — not the spreadsheet for Series A with lots of stuff that is completely irrelevant.
Three days after the call, Vinod from Khosla Ventures scheduled a call with us. By that point, Vinod was a God to me — it was like meeting one of your heroes. Two or three weeks after that call in early 2019, we had signed the term sheet with Khosla Ventures.
This was genuinely the first time that someone looked at us and saw us for what we were and the potential of what we had built. I’m very grateful to Vinod, Delian, and the rest of the team at Khosla Ventures — they took a chance on us. We paid them handsomely, to be clear, but the merit is totally with them.
How attracting talent is the most important aspect to fuel growth for any startup
Kyriakos: You mentioned that your Chief Talent Officer hire was one of the most important hires you made. Could you expand on this and how are you able to attract the best talent?
Virgilio: That’s the thing about VCs right? Really good VCs feed you talent and I was introduced to our Chief Talent Officer through Khosla Ventures. This still happens today where we get access to the best talent through our investors.
I was recently talking to an investor about fundraising when he asked — what about instead of raising X amount of money if you raise 2X, can you go twice as fast? I responded that our bottleneck is not access to capital, it's access to talent.
I could have 2X the money in my bank account, but I still wouldn’t be able to grow twice as fast.
It really comes down to being able to access talent, because we have many, many projects that we would love to kickstart, but we don’t because we still don’t have the talent we need to properly lead those processes.
If you ask me, there are many things that a VC and investors can do for you in terms of accelerating your growth — I believe access to talent is the number one thing.
Product changes to grow Sword Health from $2 million to $200 million
Kyriakos: I hear you went from $2 million to $200 million, but what did you change - did you change your product fundamentally or your approach of going to market?
Virgilio: So we expect to close the year at $200 million ARR and we surpassed $100 million for the first time in February this year and we expect to do $200 million contracted ARR by the end of the year. Basically we're always optimizing our solutions - in terms of getting feedback to clients, getting feedback from our team, and always optimizing our solution to really increase the win rate.
Remove all the no's - okay, we got a no from this deal. Why - because of X, then let's solve for X. That's one thing that I think we've done quite well, actually, our commercial team. One thing that really highlights the difference between Sword and other places is the ability to go from -okay, we have a problem - to a solution is now live. That happens very quickly.
The benefits of thinking from first principles and being an outsider in the healthcare space
Kyriakos: I think you also spoke a few times about being an outsider. Why does it help you being an outsider — especially in the healthcare space?
Virgilio: Because it allows you to think through a different lens. The reason why that’s especially important for us is that if you’ve been in the healthcare space for 20 years — the way you’re going to look at problems is completely one-sided. It all comes down to creativity and connecting the dots — if all your dots are within the healthcare space, then your solutions will be solutions that already exist within the healthcare space. By definition, those are not the solutions to the problem — otherwise, the problems would have been solved by now, right?
Essentially, you need to expand your knowledge from other areas so that you can connect the dots between what you’ve seen in healthcare to what you’ve seen in other areas and then come up with really original new ideas.
For example, I come from the engineering field and my approach to solving problems in healthcare is not the traditional healthcare way of solving problems — such as hiring another physician or health coach to solve a problem.
Another example is that I just read a paper about large language models and generative AI and I believe there is a use case to implement this in the healthcare industry as well. That’s what original thinking is and that’s why you need other data points from other areas and fields.