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Billionaire Groupon founder Lefkofsky returns with another IPO: AI health tech company Tempus

Eric Lefkofsky knows all about going public, and he’s about to make his fourth foray into the business. The serial entrepreneur, whose net worth is estimated at nearly $4 billion, has taken three of his businesses public.

Today, he’s the founder of Tempus, a genetic testing and data analytics company preparing to go public, but he’s best known as the co-founder of group-buying pioneer Groupon, which went public in 2011 with a valuation of nearly $13 billion in one of the year’s most high-profile IPOs.

While Groupon’s IPO and post-IPO years were troubled, Lefkofsky has fared well when his other two companies, InnerWorkings in 2006 and Echo Global Logistics in 2009, went public without catching the attention of investors. InnerWorkings, the supply chain startup he founded in 2001, was sold to a private equity firm in 2021 for a fraction of its IPO value.

Meanwhile, Echo Global Logistics’ share price appreciated steadily over its 11-year history as a public company, before being sold to a private equity firm in 2021 for 50% above its last traded price.

Some of Groupon’s controversies include a report that he pocketed more than $300 million from Groupon’s pre-IPO funding round, leaving the company with little working capital, and that he cut his reported revenue by about half in an amended S-1 filing after regulators scrutinized the financials in its initial S-1 filing. The unorthodox decision also brought to light another deal from his past. In 2000, he sold, a company he founded during the dot-com era, to a 50-year-old company; a year later, the company reportedly filed for bankruptcy.

All of this has earned Lefkofsky a reputation as someone who can turn everything he does into gold, at least for himself, but perhaps not for his company’s long-term investors.

With Tempus, Lefkofsky hopes to once again build a long-term, valuable company. He founded Tempus in 2015 after his wife reportedly underwent successful treatment for breast cancer.

“I was puzzled by how little data was involved in her care,” he told Forbes last year. “I became obsessed with the idea that all of this technology that’s been developed for other industries could be applied to cancer care and help doctors make data-driven decisions.”

He stepped down as CEO of Groupon in 2015, when the company’s market value fell to $2.6 billion. (Groupon’s current market value is about $600 million.) At the time, Lefkofsky focused his attention on an early-stage venture capital firm, Lightbank.

Interestingly, the Tempus S1 filing shows that he has not taken a salary for the past two years (the S-1 filing does not provide executive compensation for any named executive for more than two years). However, the filing also shows that he will receive $800,000 in salary and an $800,000 bonus starting in 2025. The prospectus shows that although he has not taken a salary, he has received $5.3 million in dividends from company stock this year.. Tempus also allegedly covered the cost of $7.5 million worth of preferred stock issued to him, as well as $200,000 in private jet expenses.

Tempus’ revenue for 2023 is $531 million, up 66% from $321 million in 2022. But the company is still bleeding cash, with net losses of $265 million and $196 million, respectively. However, the silver lining in its financials is that its operating loss margin has narrowed from 83% in 2022 to 37% in 2023, according to the S1 filing.

Additionally, Tempus has reached an agreement with Pathos AI, another company founded by Lefkofsky. Pathos AI is a drug discovery platform founded in 2020 that uses artificial intelligence and data. Pathos pays Tempus for licensing rights to its data. Meanwhile, Ryan Fukushima, Tempus’s COO, serves as Pathos’ CEO and splits his time between the two companies.

There are other signs that Lefkofsky wielded more power than usual at Tempus.

While Tempus has yet to fill out its list of major shareholders, revealing only that Lefkofsky is one of them and owns at least 5% of the company, the billionaire clearly wants to retain full control of the company after it goes public. Tempus has granted him a massive 30 votes per share. Super-voting shares are not uncommon, but 10 votes per share is more common, and 20 is considered high. So this is an unusually high level of shareholder influence for a healthcare company CEO, and we’ll have to see if that influence is reduced in future S-1s, indicating whether potential investors are hesitant about it.

However, Tempus’ S-1 may not overstate how important Lefkofsky is to the company’s future. A healthcare venture capitalist who invests in genomics and data analytics companies told TechCrunch that Tempus wouldn’t have grown to its current size or raised as much money without Lefkofsky’s marketing and fundraising skills.

Tempus has raised $1.42 billion from investors, including his firm Lightbank, NEA, Revolution Growth, T. Rowe Price, Novo Holdings, Franklin Templeton and Baillie Gifford. The company was last valued at $8.1 billion in October 2022. Tempus’ S1 filing also shows that it recently received $200 million from SoftBank.

Regardless of how much money Tempus raises in its IPO, the company’s prospectus makes clear that it’s still far from breakeven and will need to “raise additional funds in the future.” While most unprofitable companies typically include this detail in their prospectuses, it still likely means that investors should expect Tempus to conduct a follow-on public offering at some point, which could weigh on its stock price.

Tempus is also trying to position itself as an AI company, although AI revenue will only account for $5.5 million, or about 1%, of total revenue in 2023.

“I think Tempus has promise for growth and maturity in AI in the life sciences, but I don’t think the company’s current offerings have yet to demonstrate that,” the healthcare investor said.

The company said in its S-1 filing that while its “AI product line is in its infancy, it plans to embed AI, including generative AI, into every aspect of its diagnostic tools.” Tempus declined to comment beyond what is listed in the S-1 filing.

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