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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