RealTime IT News

Alley in the Heartland

There are a growing number of Internet companies that provide venture capital for 'Net start-ups, including CMGI (CMGI), Internet Capital Group (ICGE) and internet.com (INTM).

But only one is invoking a higher power in its bid to fund winners in the B2B e-commerce sector. That company is divine interVentures, which has filed with the SEC for a $250 million public offering at a date to be determined. The company will trade on the Nasdaq ticker under the symbol DVIN. Lead underwriters are Credit Suisse First Boston and Donaldson, Lufkin & Jenrette.

Based in Lisle, Ill., divine interVentures is an incubator/venture catalyst that funds start-ups in the Midwest and provides them with free rent, Web hosting and numerous other support as they develop their business models.

It focuses on two kinds of B2B e-commerce companies: "market makers," which bring together via the Web buyers and sellers of products and services, and "infrastructure service providers" that offer enabling software or services such as consulting, design and systems integration.

Company founder Andrew Filipowski's goal is to instantly create a Silicon Alley-like infrastructure in Chicago - with divine InterVentures at its burly center -- that would help fledgling 'Net companies and spin-offs from non-Internet companies quickly turn the heartland into a major hub of Internet development and commerce.

It's an ambitious plan, but right now that's all it is: A plan. Divine InterVentures itself is a start-up, having formed in early May. Revenues through Sept. 30 were $17,000, against $1.5 million in operating expenses.

Indeed, in its S-1 filing, the company tells prospective investors, "Because we have only recently begun operating and because many of our partner companies are in the early stages of their development, we are unable to provide you with significant data upon which you can evaluate our prospects."

That's a warning worth considering, as is this (also from the S-1): "Further, our management has not previously actively managed, operated or promoted Internet companies, and we cannot assure you that they will be able to do so effectively."

Finally, much of divine InterVentures' strategy rests on the rapid growth of both the infrastructure it is building and the companies it funds. That growth may be restrained by a talent shortage in the Midwest.

The company has attracted a number of angel investors (including William Wrigley Jr.) and corporations such as Computer Associates willing to place early bets that Filipowski, the founder of Platinum Technology and something of a legend in Chicago business circles, can build an Alley in the Heartland.

For investors paying post-IPO prices, however, divine InterVentures may require quite a leap of faith.

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