Billionaire Groupon founder Eric Lefkofsky’s health technology went public today

FFive years ago, Chicago-based billionaire and serial entrepreneur Eric Lefkofsky said Forbes he hoped that Tempus AI, a health analytics and precision medicine company, would be his “legacy project.” It is currently his most valuable asset and his fourth company to go public.

The company’s shares were priced at $37 per share on Thursday on the Nasdaq and began trading Friday, giving Tempus a market cap of $6.1 billion, lower than Tempus’ last private valuation of $8.5 billion from a 2022 funding round. Lefkofsky , founder and CEO, is estimated to have a 33% stake in the company, worth $2 billion. That makes Lefkofsky’s net worth approximately $3.9 billion. Tempus is his first company to go public since the 2011 IPO of discount e-commerce company Groupon, a listing that made him a billionaire.

If Tempus’ stock price holds up or rises, it could pave the way for some of Tempus’ private competitors to also go public, after several years of a rather inactive IPO market.

(Update: Tempus closed the day’s trading at $40.25, up 9% from its IPO price. Lefkofsky’s stake is now worth $2.2 billion.)

Lefkofsky founded Tempus in 2015 after his wife was diagnosed with breast cancer and he was “just perplexed at how little data had filtered into her care,” he said. Forbes in 2019. The company, which has 2,300 employees, started as an oncology-focused company: sequencing cancer patients’ tumor samples, for example, and analyzing them with machine learning-trained models to help provide more accurate diagnosis and personalized treatment – and has gradually expanded to other disease areas: neuropsychiatry, radiology and cardiology. Customers include more than 2,000 healthcare providers who send their patients’ samples for testing, and 19 of the world’s 20 largest pharmaceutical companies, which license Tempus’ vast amounts of data for use in drug discovery. Tempus lost $214 million on $532 million in 2023 revenue; Key expenses include the cost of conducting genetic testing, research and development expenses, and data acquisition and training. The long-term goal, according to a filing with the Securities and Exchange Commission about the public offering, is to use artificial intelligence to analyze healthcare data and further personalize care for “all major disease areas worldwide.”

“I am excited to continue leading the company into the next phase of our story as a publicly traded company,” said Lefkofsky. Forbes Called Friday morning. “We are still in the early stages of applying any form of AI to healthcare. There is so much to do and so many benefits that patients can achieve, which is a great place to be.â€

Tempus launched with $10 million in funding from Lightbank, a venture capital firm co-founded and seeded by Lefkofsky and his longtime business partner and Groupon co-founder Brad Keywell. Since then, investors including Google, New Enterprise Associates, billionaire and AOL co-founder Steve Case’s Revolution, Softbank and investment firm Baillie Gifford have poured more than $1.3 billion into Tempus. The company has also raised money through debt financing, primarily from alternative investment firm Ares Management; in its SEC filing on the public offering, Tempus says it could use some of the proceeds from the offering to pay off the $266 million loan. Tempus raised $410 million in its public offering.

Lefkofsky’s 33% stake after a public offering is unusual in the world of fast-growing, venture-backed technology companies, where outside investments are typically diluted. Lefkofsky also owns all of Tempus’ stock, giving him about 65% of the voting control. Other key stakeholders in Tempus include fellow billionaire Brad Keywell and his ex-wife Kimberly Keywell, who each own about 10% of the company, and Baillie Gifford, who owns about 6%.

Tempus is one of at least nine companies that Lefkofsky founded or co-founded. It also acquired about 20% of its most recent startup, drug development company Pathos AI, for about one cent per share, or about $4 million. (Pathos is now worth an estimated $400 million; Lefkofsky owns about 65%.)

As Lefkofsky has become wealthier and more experienced, he has retained increasing stakes in the companies he co-founded. When Marketing Technology InnerWorkings went public in 2006, Lefkofsky owned about 11% of the company; after Echo Global Logistics’ IPO in 2009, he had 13%, and when Groupon went public in 2011, he had 21%. (Both InnerWorkings and Echo Global have stopped trading; Groupon’s share price is down 95% from its IPO price).

Tempus’ long-term success in the public markets may depend on its ability to even break through sooner or later. Despite a 66% increase in revenue between 2022 and 2023, Tempus is still losing money. It currently has $57 million in working capital and $450 million in debt — enough to fund “the current operating plan” for at least another year, according to the company’s registration statement.

Tempus financial data from 2019-2023

“The company is losing a ton of money at a time when companies are being punished for losing huge amounts of money,” said Donovan Jones, an analyst at Seeking Alpha. Right now, tech companies that go public are “slightly more desperate” for money than those that can wait, Jones added.

But Lefkofsky is optimistic about Tempus, given its impressive revenue growth. If Tempus stays on its current trajectory, the company expects to become profitable in the “not too distant future,” he says.

Baillie Gifford, in a blog post outlining why it invested so heavily in Tempus, highlighted Tempus’ two-pronged business model: genomics and related testing, which makes up 62% of Tempus’ revenues, and data and services, which make up the remaining 38%. Tempus’ ability to monetize the data itself — which is growing and improving as more patients send samples to Tempus for analysis — could push the company toward profitability.

Bruce Quinn, a healthcare technology consultant, praised Lefkofsky’s vision to bring together clinical records and clinical testing services in one company: “That’s what I see as differentiating [Lefkofsky’s] He added that Tempus can grow if it continues to expand its pharmaceutical partnerships, which generally “are mostly cash flow positive.” There is a higher barrier to entry when it comes to expanding Tempus’s genomics revenues. , especially because, according to Quinn, there is a smaller market for it in non-cancerous diseases.

Entering a not-so-friendly IPO market, Tempus finds itself in a crowded competitive space that includes publicly traded companies Guardant Health and Neogenomics, as well as ConcertAI, a subsidiary of billionaire Romesh Wadhwani’s SymphonyAI. On Tuesday, Guardant filed a lawsuit against Tempus, alleging that four of Tempus’ products use liquid biopsy technology that violates some of Guardant’s patents. “We intend to vigorously defend ourselves in this case,” Tempus wrote in the filing. Tempus declined further comment.

As Tempus continues to grow, Lefkofsky hopes it can monetize services like the AI ​​models Tempus helps create for doctors to help suggest tests and therapies for patients. Such models currently don’t generate much revenue for the company (less than $1 million in the last three months, despite operating in more than 100 hospitals). “We still haven’t found the right way to compensate companies like ours for this, but we think they will be widely deployed over time, if that becomes the case,” he says.

Although Tempus is Lefkofsky’s fourth company to go public, he says it’s a unique story for him because it’s his first time as CEO of a company he founded when going public.

“You learn something from each of these companies, whether they’re doing great or not,” Lefkofsky says. “When we started Tempus, one of the most important lessons was that we really wanted to take the time to get the basics of the company right. Focus on oncology, focus on one market, in this case the United States. Be diligent in building a foundation that we thought could support long-term growth, rather than growing too quickly and internationally.”