Billionaire Groupon founder Eric Lefkofsky is back with another IPO: AI health tech Tempus

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Eric Lefkofsky is aware of the general public itemizing rodeo effectively and is about to enter it for a fourth time. The serial entrepreneur, whose web price is estimated at nearly $4 billion, has already taken three companies he’s based public. 

As we speak he’s the founding father of Tempus, a genomic testing and knowledge evaluation firm making ready to IPO. However he’s finest often known as the co-founder of every day offers pioneer Groupon, which went public at a valuation of nearly $13 billion in 2011, in certainly one of that yr’s most high-profile debuts. 

Groupon’s IPO and post-IPO years had been infamously troubled, although the general public listings of his different two corporations — InnerWorkings in 2006 and Echo World Logistics in 2009 — didn’t increase important flags for buyers and did effectively for Lefkofsky. InnerWorkings, a provide chain startup he based in 2001, offered to private equity in 2021 for a fraction of its IPO market cap.

In the meantime, the inventory of Echo World Logistics appreciated steadily throughout its 11-year public life historical past earlier than additionally being offered to personal fairness at a 50% premium over its final buying and selling worth in 2021. 

A few of the controversies with Groupon concerned a report that Lefkofsky pocketed over $300 million from Groupon’s pre-IPO spherical, leaving little working capital for the corporate, and reducing its reported income in about half in revised S-1 filings after regulators scrutinized the financials in its preliminary S-1. That unorthodox choice has additionally delivered to mild one other deal from his previous. He offered his dot-com-era firm in 2000 to a 50-year-old firm; a yr later, that firm filed for chapter, according to some reports.

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All of this has given Lefkofsky the popularity of getting considerably of a golden contact, not less than for himself, however possibly not for long-term buyers of his corporations. 

With Tempus, Lefkofsky is taking one other shot at making a long-lasting, useful firm. It was reportedly his spouse’s profitable breast most cancers therapy that led him to discovered Tempus in 2015.

“I used to be perplexed at how little knowledge was part of her care,” he informed Forbes last year. “I turned fixated with this concept that there was all this know-how that had been created for different industries that may very well be utilized to most cancers care and assist physicians make data-driven selections.”

He stepped down from Groupon’s CEO position in 2015, when the corporate’s worth had fallen to $2.6 billion. (Groupon’s market cap at the moment is round $600 million.) At the moment, Lefkofsky targeted his consideration on an early-stage enterprise agency, Lightbank.

Apparently, the Tempus S-1 filing says that he’s taken no wage for the previous two years (the S-1 didn’t present greater than two years’ price of government compensation for any named officer). Nonetheless, the submitting additionally stated that he’s attributable to be paid $800,000 and an $800,000 bonus beginning in 2025. And, though he wasn’t drawing a wage, he was paid a $5.3 million dividend from firm inventory this yr, the prospectus exhibits. The submitting additionally confirmed that Tempus has additionally lined the price of $7.5 million price of most popular shares issued to him and has paid $200,000 for his personal aircraft bills.

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Tempus’ revenues had been $531 million in 2023, a 66% progress from $321 million in 2022. However the firm continues to be hemorrhaging numerous money, with web losses of $290 million (in 2023) and $214 million (in 2022). Though, the silver lining in its financials is that working loss margin has shrunk from 83% in 2022 to 37% in 2023, according to the S-1 filing.

Moreover, Tempus has an settlement with Pathos AI, one other firm Lefkofsky based. Pathos AI is a drug discovery platform based in 2020. Pathos pays Tempus for a proper to license its knowledge. In the meantime, Tempus’ COO, Ryan Fukushima, serves as Pathos’ CEO and splits his time between the 2 corporations.

There are different indications that Lefkofsky is exercising extra energy at Tempus than is customary.

Whereas Tempus has not but crammed out its principal stockholder’s chart, revealing solely that Lefkofsky is amongst them and owns not less than 5% of the corporate, the billionaire clearly desires to protect full management of the corporate after it goes public. Tempus has granted his shares a whopping 30 votes per share. Tremendous voting shares aren’t uncommon, however 10 votes per share is extra widespread, with 20 votes thought-about excessive. So that is an unusually excessive shareholder affect for a CEO of a healthcare firm, and we’ll need to see whether it is lowered in future S-1s, indicating whether or not potential buyers have balked at it.

But, Tempus’s S-1 is probably not exaggerating how important Lefkofsky is to the way forward for the corporate. A healthcare VC investing in corporations in genomics and knowledge evaluation has informed TechCrunch that Tempus wouldn’t have grown to its dimension, nor garnered a lot capital with out Lefkofsky’s advertising and fundraising abilities.

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Tempus raised $1.42 billion in funding from buyers, together with his agency Lightbank, in addition to from NEA, Revolution Development, T. Rowe Worth, Novo Holdings, Franklin Templeton and Baillie Gifford. The corporate was final valued at $8.1 billion in October 2022. Tempus’ S-1 submitting additionally revealed that it not too long ago acquired $200 million from SoftBank.

No matter how a lot capital Tempus raises in its IPO, the corporate’s prospectus made it clear that it’s nonetheless removed from breakeven and can want “to lift extra capital sooner or later.” Whereas most unprofitable corporations usually embrace this element of their prospectuses, it’s possible that buyers will anticipate Tempus to have a follow-on public providing sooner or later, which may very well be a drag on their share worth.

Tempus can be attempting to place itself as an AI firm despite the fact that AI income accounted for less than $5.5 million of income, roughly 1% of whole income in 2023. 

“I see Tempus playing on their progress and ripe timing for AI throughout life sciences, however I don’t assume the corporate has confirmed that but with their present providing,” the healthcare investor stated.

The corporate stated in its S-1 submitting that whereas its “AI product line is nascent, it plans to embed AI, together with generative AI, in each facet of its diagnostic instruments.” Tempus declined to remark past what’s listed within the S-1. 

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