Divine faces danger of getting left behind 

By Rob Kaiser 
Tribune Staff Writer 
July 16, 2000 - Chicago Tribune

The initial public offering of Divine Interventures Inc. places the latest brainchild of computer personality
Andrew "Flip" Filipowski into the public forum amid many questions about its future.

One of the biggest: Whether Divine and its charismatic boss can make good on his grandiose plan to lead
Chicago onto the high-tech map.

Even as Divine fought to go forward with its IPO and received a lukewarm reception from Wall Street,
Chicago's dot-com scene has come on strong. It's now clear that Divine's fortunes and Chicago's future as a
tech haven are not as intertwined as some suppose.

In fact, many in the local technology community say Filipowski's role of helping jump-start the Midwest's
move on-line is finished now, and they're sick of hearing about how important he and Divine are to their future.

Chicago boasts a more vibrant dot-com community than it did when Divine launched a year ago, complete with a new crop of entrepreneurs and investors and a growing perception that Internet firms can prosper in the
Midwest. Filipowski and his company may be just a small part of that—or may well be left behind.

"If he wasn't successful, it's OK," said Alan Warms, chief executive of Chicago-based Participate.com. "This
community stands on its own."

After numerous delays and price reductions, Divine completed its IPO last week. Although the Lisle-based
company raised $128.6 million with the offering, plus $218.6 million from private investors, Divine emerged
from the process beaten up by analysts and media reports.

The company's stock, originally offered at $9 per share, fell 2 percent on its first day of trading Wednesday.
Although Divine's stock closed Friday at $10.87, , 21 percent above the offering price, many people have
doubts about whether Filipowski's grand vision for the company as a new-economy conglomerate will be
realized.

Moreover, Divine's relationship with the rest of Chicago's technology community may need some
repairs.

Filipowski and Divine have had a love-hate relationship with the local dot-com community. And Divine, many
technology officials say, isn't the beginning or the end of the Chicago tech scene.

Warms, of Participate.com, pointed out that in the first quarter of this year, Filipowski's firm was involved in
only two of the 10 largest investments in Chicago-area technology companies, and those were the 8th- and
10th-largest deals.

In the past year, many venture capital firms, including those from the East and West Coasts, have shown more
of a willingness to bet on Midwest firms and have opened offices in the Chicago area. The city also has
become home to some of the most respected on-line consulting firms in the country and a smorgasbord of
start-up Internet companies.

While modest when judged against Silicon Valley, Chicago's collection of investors, entrepreneurs and
dot-com networking events has reached enough of a critical mass that participants feel they're part of a
vibrant community.

Still, some in the tech community remain grateful for the publicity Filipowski brought to the area.

"When nobody else had [enough nerve] to do something for the community, he did," said David Weinstein, CEO
of BlueMeteor Inc. and Mayor Richard Daley's former assistant for technology. "He did something impactful for
the community. He has raised the ocean for the other boats in the water."

Divine, which has invested in more than 50 Internet-related businesses, will now have to prove it
can do more than generate hype.

Many analysts and others in the so-called incubation business say that Divine invested in too many
companies, paid too much for them and expanded too quickly.

"I don't know of any other company that is trying to start so many companies at once," said Michael Silverman,
chief executive of duoDesign, an Evanston-based incubator. "I just don't think you can spit them out at that
rate."

DuoDesign, which plans to help launch four companies annually, fits the traditional model of an incubator, in
which a small community of entrepreneurs build their businesses under the same roof.

Divine planned to take that idea to the extreme, launching hundreds of companies simultaneously in
facilities around the world, as well as starting legal, real estate and public relations firms to assist in their growth.

Although Divine was able to complete its IPO, many analysts say they believe the company will rein in its
aggressive expansion plans and concentrate on its main mission to satisfy Wall Street—building successful
technology firms.

Divine is likely to scale back its previously announced $62.9 million headquarters campus at Goose Island,
according to people close to the firm. 

The city had planned to contribute $14 million in tax increment financing to the project, but that donation is
conditional on Divine following through with its original plans, said Katherine Gehl, Mayor Daley's current
assistant for technology. 

"They haven't let the city know that they're scaling it back yet," Gehl said.

Many people in the incubator industry predict Divine will now turn most of its attention to the firms on its roster
that have the best chance of quickly going forward with their own public offerings.

If Divine can show investors an ability to launch successful businesses, the company can repair the
damage it caused by forcing its IPO onto an unwilling market.

"I think they have the stuff to do it, but they need to go out and actually do it to prove themselves," said J.B.
Pritzker, managing director of William Blair New World Ventures in Evanston. "Now comes the hard part:
building a company."

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