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

Eric Lefkofsky knows the public listing rodeo well and is about to enter it for a fourth time. The serial entrepreneur, whose net worth is estimated at nearly $4 billion, has already taken three businesses he’s founded public. 

Today he’s the founder of Tempus, a genomic testing and data analysis company preparing to IPO. But he’s best known as the co-founder of daily deals pioneer Groupon, which went public at a valuation of nearly $13 billion in 2011, in one of that year’s most high-profile debuts. 

Groupon’s IPO and post-IPO years were infamously troubled, though the public listings of his other two companies — InnerWorkings in 2006 and Echo Global Logistics in 2009 — didn’t raise significant flags for investors and did well for Lefkofsky. InnerWorkings, a supply chain startup he founded in 2001, sold to private equity in 2021 for a fraction of its IPO market cap.

Meanwhile, the stock of Echo Global Logistics appreciated steadily during its 11-year public life history before also being sold to private equity at a 50% premium over its last trading price in 2021. 

Some of the controversies with Groupon involved a report that Lefkofsky pocketed over $300 million from Groupon’s pre-IPO round, leaving little working capital for the company, and cutting its reported revenue in about half in revised S-1 filings after regulators scrutinized the financials in its initial S-1. That unorthodox decision has also brought to light another deal from his past. He sold his dot-com-era company Starbelly.com in 2000 to a 50-year-old company; a year later, that company filed for bankruptcy, according to some reports.

All of this has given Lefkofsky the reputation of having somewhat of a golden touch, at least for himself, but maybe not for long-term investors of his companies. 

With Tempus, Lefkofsky is taking another shot at creating a long-lasting, valuable company. It was reportedly his wife’s successful breast cancer treatment that led him to found Tempus in 2015.

“I was perplexed at how little data was a part of her care,” he told Forbes last year. “I became fixated with this idea that there was all this technology that had been created for other industries that could be applied to cancer care and help physicians make data-driven decisions.”

He stepped down from Groupon’s CEO role in 2015, when the company’s value had fallen to $2.6 billion. (Groupon’s market cap today is around $600 million.) At that time, Lefkofsky focused his attention on an early-stage venture firm, Lightbank.

Interestingly, the Tempus S-1 filing says that he’s taken no salary for the past two years (the S-1 didn’t provide more than two years’ worth of executive compensation for any named officer). However, the filing also said that he’s due to be paid $800,000 and an $800,000 bonus starting in 2025. And, although he wasn’t drawing a salary, he was paid a $5.3 million dividend from company stock this year, the prospectus shows. The filing also showed that Tempus has also covered the cost of $7.5 million worth of preferred shares issued to him and has paid $200,000 for his private plane expenses.

Tempus’ revenues were $531 million in 2023, a 66% growth from $321 million in 2022. But the company is still hemorrhaging a lot of cash, with net losses of $290 million (in 2023) and $214 million (in 2022). Although, the silver lining in its financials is that operating loss margin has shrunk from 83% in 2022 to 37% in 2023, according to the S-1 filing.

Additionally, Tempus has an agreement with Pathos AI, another company Lefkofsky founded. Pathos AI is a drug discovery platform founded in 2020. Pathos pays Tempus for a right to license its data. Meanwhile, Tempus’ COO, Ryan Fukushima, serves as Pathos’ CEO and splits his time between the two companies.

There are other indications that Lefkofsky is exercising more power at Tempus than is customary.

While Tempus has not yet filled out its principal stockholder’s chart, revealing only that Lefkofsky is among them and owns at least 5% of the company, the billionaire clearly wants to preserve full control of the company after it goes public. Tempus has granted his shares a whopping 30 votes per share. Super voting shares are not unusual, but 10 votes per share is more common, with 20 votes considered high. So this is an unusually high shareholder influence for a CEO of a healthcare company, and we’ll have to see if it is reduced in future S-1s, indicating whether prospective investors have balked at it.

Yet, Tempus’s S-1 may not be exaggerating how essential Lefkofsky is to the future of the company. A healthcare VC investing in companies in genomics and data analysis has told TechCrunch that Tempus would not have grown to its size, nor garnered so much capital without Lefkofsky’s marketing and fundraising skills.

Tempus raised $1.42 billion in funding from investors, including his firm Lightbank, as well as from 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’ S-1 filing also revealed that it recently received $200 million from SoftBank.

Regardless of how much capital Tempus raises in its IPO, the company’s prospectus made it clear that it’s still far from breakeven and will need “to raise additional capital in the future.” While most unprofitable companies generally include this detail in their prospectuses, it is likely that investors will expect Tempus to have a follow-on public offering at some point, which could be a drag on their share price.

Tempus is also trying to position itself as an AI company even though AI revenue accounted for only $5.5 million of revenue, approximately 1% of total revenue in 2023. 

“I see Tempus gambling on their growth and ripe timing for AI across life sciences, but I don’t think the company has proven that yet with their current offering,” the healthcare investor said.

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