| To: astyanax who wrote (92) | 8/18/2000 4:47:16 PM | | From: Glenn Petersen | | | | From today's Chicago Sun Times:
suntimes.com
Despite loss, divine says future
bright
August 18, 2000
BY JESSICA MADORE FITCH BUSINESS REPORTER
In its first public statement since going public in July, divine interVentures inc. was
predictably upbeat about the future, although the company's financial results were far
less sunny.
Revenue more than doubled last quarter, but divine's net loss nearly doubled as well.
The Lisle-based Internet incubator reported a loss of $75.4 million in the second
quarter, compared with a $44.2 million loss in the first quarter. Revenue rose to
$12.1 million, up from $5.2 million.
Divine's consolidated financial results, however, only include 26 of its 52 associated
companies, and therefore don't reflect the breadth of its financial position. In lieu of
this, divine offered unaudited aggregate revenue for its 52 associated companies:
$60.7 million in the second quarter, a 54 percent increase over $39.3 million in the
first quarter.
During a conference call Thursday, founder Andrew J. "Flip" Filipowski reminded
the audience that divine is still a very young company, having recently celebrated its
first birthday.
"We're pleased with the progress of the companies in our portfolio and proud of our
people's efforts to create value by working in concert," Filipowski said.
Mike Cullinane, divine's chief financial officer, said divine is burning through $3
million each month and has about $327 million in cash and securities on hand.
"Things look better than I expected," said George Nichols, an analyst at
Morningstar, the Chicago-based financial information company.
But in light of the finicky public market, Filipowski has become more conservative
about divine's investments.
In the first quarter of the year, divine spent $200.6 million of $247.3 million of
deployed capital on new investments. But in the past three months, divine spent just
$76.7 million of $324 million in deployed capital on new investments.
"They are investing more of their money in their current portfolio companies, rather
than bringing new companies into the fold," Nichols said. "They need to nurture their
own companies, rather than stretch themselves even thinner."
Shareholders boosted shares of divine before the earnings announcement. The stock
finished Thursday up 53 cents at $7.50, still below the $9 IPO price and its high of
$12.43 3/4. |
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| To: Glenn Petersen who wrote (133) | 8/21/2000 9:21:20 AM | | From: Glenn Petersen | | | | From Sunday's Chicago Tribune:
chicagotribune.com
Pressed for time, Divine
realigns
By Barbara Rose
and Rob Kaiser
Tribune Staff Writers
August 20, 2000
It's a good thing there aren't any nameplates on
managers' doors at Mercantec Inc.
Since February, when Divine Interventures Inc. bought
40 percent of Naperville-based Mercantec for $23.5
million, four new executives have been installed and at
least as many have left.
Divine's team slashed Mercantec's marketing budget and
pushed the firm to strengthen its ties with big Internet
service providers that can help it sell its
electronic-commerce software to small and midsize
businesses.
"They are the most active venture capitalists I have ever
worked with," says Tom Lewicki, Mercantec's former
chief financial officer, who runs a consulting practice in
Champaign.
Divine can't afford to be passive.
The year-old company is among the boldest of hundreds
of incubators that sprang up around the U.S. during last
year's Internet euphoria, when investors snapped up
shares of companies with scant financial histories.
Now, with Internet stocks off more than 50 percent
since April, Divine is trying to persuade investors that its
business model will work, even in a market that is
soured on risky start-ups.
That won't be easy.
Only a handful of the 53 companies in which Divine
bought stakes are profitable, and two-thirds are
expected to continue losing money next year.
Divine is cutting expenses and preparing to let some
start-ups fail while pushing more promising ones as
quickly as possible toward mergers, sales or public
offerings—at higher valuations, it is hoped, than those at
which Divine invested.
"We are very realistic in that some of [the companies]
will survive and some of them won't," founder and chief
executive Andrew "Flip" Filipowski told analysts last
week. "It becomes clearer over time which we will focus
on and which we won't."
There is little time to waste.
Divine raised a total of $338 million from public
investors and big corporations last month enough to
meet its working capital and cash needs for at least 12
months.
But Divine needs to prove quickly that it can produce
winning companies in order to build credibility and boost
its stock price so that it can return to the market later for
more money, people who follow the company say.
"We believe there's some great companies [in Divine's
portfolio]," says local venture capitalist George Garrick,
one of Divine's 43 directors and former CEO of Internet
marketer Flycast Communications Corp., now part of
CMGI Inc.
"But until some of them start going public with
multibillion valuations," Garrick adds, "we're not going to
know."
So far, investors don't share Garrick's confidence.
Divine's stock has trended down to the $7 area since its
$9 per-share offering July 12.
That's barely higher than the $6 price (adjusted for a
6-to-1 reverse split at the IPO) paid last year by early
private investors—including a high-profile board of
Chicago CEOs who backed Filipowski's vision for
building a powerful Internet consortium.
Employee option prices range from $4.50 to $13.50,
split-adjusted, which means that recruits who were
banking on a windfall when Divine went public are
sorely disappointed.
Nonetheless, backers such as San Francisco-based
brokerage Robertson Stephens, the lead underwriter for
Divine's IPO, view the stock as a good long-term
investment worth as much as $35 per share, based on
the potential market value of Divine's holdings.
Filipowski's team has been working with Divine's
companies to revamp their business plans in light of
investors' demand that start-ups offer convincing
timetables for becoming profitable.
For many firms, that is requiring a big adjustment from
last year, when venture capitalists favored spending
aggressively to gain advantage in the race to capture
customers and grow sales.
"We're concentrating on plans that allow [companies] to
break even in the shortest amount of time … even if it
means sacrificing some on the growth," Filipowski told
analysts.
Divine also is looking to combine complementary
companies into bigger enterprises that can be profitable
faster. One scenario calls for merging Divine's Internet
services providers—firms offering Web design, strategy,
public relations, real estate and other services—into a
single company called Charisma.
The mood at Divine's wide-ranging companies,
meanwhile, varies as widely as the companies'
prospects.
At Web Design Group in Chicago one of Divine's
profitable companies—the staff has more than doubled,
to 60, since January.
"I think everyone is cautious about the stock right now,"
says Charles Stevenson, chief operating officer, who
started the company five years ago in an apartment. "We
wish it had done better."
Others are bluntly pragmatic.
"We wanted a couple of things [from Divine] some cash,
to solidify our management team and to move from
working with start-ups to mainstream clients," says Nate
Weersing, founder and CEO of Westbound Consulting
Inc., an integration services firm with programmers here
and in India.
"Would it be great if Divine were the greatest thing since
sliced bread? Yeah, but we got what we wanted. We
made the [partnership] work."
At Mercantec, which reported a slim $1.5 million in
sales last year, Divine's revamp left hard feelings.
Several former employees say the company needed
better focus, but that they felt bowled over when
Divine's recruits took charge.
"A lot of them didn't know a thing about software or the
Internet," says a former employee. "They were a little
heavy-handed."
Mercantec CEO Andy Parker disagrees. "It's not like
[Divine] pushed people down our throats," he said. "The
company was a little screwed up and we brought in
some people … who could help fix it."
At Closerlook Inc., a growing digital strategy and design
firm with 1999 sales of $7.4 million, investment bankers
are starting to call on founder and CEO David
Ormesher—a sign the company may be considered a
promising IPO prospect, though Ormesher is in no
hurry. Divine invested $17.5 million in February for a 43
percent stake.
Motorola Inc. joined Divine in an $18 million investment
in Perceptual Robotics Inc., which offers software that
allows Internet users to operate remote cameras. The
4-year-old firm recently moved to Chicago from
Evanston with the help of Divine's majority-owned real
estate services firm, Dotspot.
Unlike companies such as Mercantec, Perceptual
Robotics is gearing up to spend more on marketing.
"We could become profitable relatively easily by cutting
back the rate at which we're investing," says CEO Paul
Cooper. "For us, it's really a question of how much we
want to invest in being the leaders in our market.… We
plan to invest to grow for at least another 18 months."
As for Divine's overall prospects, insiders say
Filipowski's team is convinced the company's portfolio
includes at least a few bright stars.
"That's certainly what investors are hoping for, those
home-run hits," says Paul Bard, analyst at Renaissance
Capital in Connecticut.
Bard's firm declined to invest in Divine's IPO, but he
believes incubators as a class have big potential.
Says Bard: "All it takes is a small number of really strong
investments in one of these companies' portfolios to
really do well." |
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| To: Glenn Petersen who wrote (134) | 10/5/2000 8:00:10 PM | | From: Glenn Petersen | | | | DVIN departs from Austin:
chicagotribune.com
Divine dumps planned Austin incubator
By Erik Ahlberg
Dow Jones Newswires
October 5, 2000
Beleaguered Divine InterVentures has backed away from plans to start an incubator project in Austin, Texas, the
company confirmed today.
Divine had planned to build the Austin incubator community in about 500,000 square feet of office space with the
help of two of its executives recruited from Dell Computer Corp.
Other similar projects in Chicago and Seattle are on hold until market conditions for technology and dot-com
companies improve, the company said.
"Right now we prefer to apply our resources toward our family of companies rather than invest significantly in new
opportunities," said Chief Financial Officer Michael Cullinane.
Sources said the Austin project could have cost upwards of $50 million to $100 million.
The moves fall in line with the company's belt-tightening strategy from earlier in the year. By capping its rapid
spending to about $3 million a month from $13 million a month, Divine can more easily focus on its portfolio of
more than 50 companies, said stock analyst George Nichols of Morningstar Inc. of Chicago.
"This is a sign of good things for them," Nichols said. "They need to focus on the areas that they know best."
Divine had not yet committed any significant capital toward the Austin project but the move nonetheless
demonstrates the tough environment faced by most technology and Internet-related companies this year, said
analyst Sara Rashtchy of U.S. Bancorp Piper Jaffray.
"We're still seeing casualties in the dot-com space," Rashtchy said. The venture capital markets have largely dried
up, he said, and even existing companies are having trouble beyond the initial investment stage.
So what does that mean for a company like Divine?
"It's definitely bad," Rashtchy said. Beyond the capital crunch, the bad market for initial public offerings means that
parent companies like divine can't expect to get much in return even if they do take firms public, he said.
Divine stands to gain once technology companies get aggressive in the merger and acquisition stage, Rashtchy said.
Instead of relying on public markets, companies will only be reliant on one another for deals, he said.
But it won't come without a wait, and Divine's shares are already suffering. The stock recently traded at $3.13,
down 18 percent or 69 cents on volume of 432,600 compared with an average daily volume of 494,200. |
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| To: Glenn Petersen who wrote (135) | 10/15/2000 6:19:01 PM | | From: Johnnie W. | | | | | Nasty article in BusinessWeek. Other VCs trashing incubators and the author concluding that DVIN doesn't have much in their portfolio. This stock is so bloodied that the article probably helps more than it hurts. |
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| To: Johnnie W. who wrote (136) | 10/17/2000 3:29:57 PM | | From: Glenn Petersen | | | | From today's Chicago Tribune:
chicagotribune.com
Divine decline
The stock plunge of Chicago's hope for an Internet king is affecting investors large and small
By Barbara Rose
Tribune Staff Writer
October 17, 2000
If misery loves company, Divine Interventures Inc. shareholders have plenty of
both.
The Internet incubator's stock has lost more than 65 percent of its value since it
went public 13 weeks ago at $9 per share, closing Monday at $2.87 a share.
Earlier this month it hit a low of $2.25 a share, below even the value of its cash
holdings.
Yet Divine's languishing stock doesn't take a full accounting of the pain felt by
investors in a company that was touted nine months ago—at the height of Wall Street's Internet euphoria—as
Chicago's best hope for grabbing a bigger share of new economy riches.
Founder and CEO Andrew "Flip" Filipowski recruited a "who's who" of the local tech and venture investing
community to Divine's board last fall while raising a total of $430 million from wealthy individuals and companies.
Backers bought into his ambitious vision for building a global consortium that could rapidly grow Internet-related
businesses in areas like Chicago, where venture money is relatively scarce.
Now, "everyone is underwater except for people who got shares for nothing," noted a local investor who bought at
the pre-IPO price of $6 per share, split-adjusted.
"I think you can make a computation of how many shares of anguish that is."
Indeed, Divine, which attracted a total of $768 million in equity capital in less than 12 months, now has a market
value of less than $400 million.
Bottom line: Investors have sustained more than $368 million in paper losses.
The pain is spread widely among high-profile individuals such as Chicagoan William Wrigley Jr., who invested $17
million before the IPO, and corporate powers such as Michael Dell's Dell Computer Corp., which invested $100
million in January.
To be sure, Divine is not alone in disappointing its backers since Wall Street's tech-stock wreck in April.
The two closest comparable stocks—CMGI Inc. and Internet Capital Group, both more mature Internet
consortiums—are down about 90 percent from their 52-week highs. For the 13-week period since Divine went
public, they are down 60 percent.
"It's been brutal and very ugly for our entire sector," Filipowski said in an interview last week. "It gets to the point
where it's depressing to look across the entire spectrum of the technology marketplace. It is just very difficult to
make peace with the fact that the market ... is putting these kinds of value on companies."
Filipowski conceded there is no "magic bullet" for Divine's stock or for the company's prospects short-term.
"You have to survive these periods so you can exist on the other end of the cycle, when the picture gets a little bit
better," he said.
Meanwhile, Divine will continue cutting expenses, looking for opportunities to sell or merge some of its holdings
while investing only in the most promising of the 50-odd start-ups in which it took stakes, according to analysts
and observers.
Divine had $327 million in cash in mid-August, which analysts estimate will last at least two years based on the
company's spending rate.
Strong backers such as investment bank Robertson Stephens, which took Divine public, say the stock is cheap.
"A lot of stocks have been hurt because something's changed fundamentally, but there's been nothing
company-specific that should affect Divine's stock other than market sentiment," said Robertson Stephens analyst
Michael Graham.
Because Divine's stock is trading near the level of its cash, he said, investors essentially are getting Divine's
portfolio of start-ups for free.
Divine's book value, or the money it invested in start-ups plus its cash on hand, is $6.10 per share, and Graham
believes Divine's fair market value is as high as $32 per share.
Yet investors clearly aren't buying that argument. One reason is that portfolios of start-ups without financial track
records are notoriously hard to value.
Another is that when markets turn down, portfolios of assets that can't easily be liquidated trade at steep discounts.
Investors don't want to buy them at any price. And, as Morningstar analyst George Nichols said, they "aren't
willing to wait years."
Of course, shareholders who bought stock before the IPO have no choice but to wait at least six months before
selling because of "lock-up" agreements signed by pre-IPO investors.
Corporations that invested a combined $218 million in a private placement concurrent with the IPO can't sell for
12 months after the IPO. Their average cost basis: $8.48 per share.
That includes Aon Corp., BancBoston Capital Inc., CMGI Inc., Compaq Computer Corp., Hewlett-Packard
Co., Level 3 Communications, MarchFirst Inc., Microsoft Corp. and 360networks Inc.
Such investors typically look to recoup their money longer-term by selling products and services to the entity in
which they invest. In Divine's case, the hope is Divine's start-ups will be customers.
Microsoft, for instance, required that Divine purchase $15 million worth of software and services and spend $4
million to promote Microsoft's services to its associated companies over four years. In addition, Divine is obligated
to invest $50 million on projects and companies in the Seattle area, where Microsoft is based.
A Microsoft spokeswoman declined to comment last week.
At Dell Ventures, the investing arm of Dell Computers, patience is the watchword, says marketing director John
Thompson. Dell Ventures, with about $1 billion under investment, bought $100 million worth of Divine's shares in
January at $6 per share, split-adjusted.
Divine had bought $5.6 million of Dell computers and services as of June 30, according to Securities and
Exchange Commission filings.
Thompson said Dell doesn't look for a quid pro quo return, though it does hope its investments will appreciate.
Rather, it looks to establish relationships with companies that are developing technologies that may offer
opportunities for future partnerships.
"Having a relationship with Divine is a good thing both today and going forward, because of the innovation that
occurs as the young companies sprout," Thompson said. "It cements the relationship."
Likewise, Compaq's vice president of corporate development, Bud Enright, said his company is "very positive"
about its investment in Divine despite the stock showing.
"We've got people dedicated to their associated companies. We're making progress on a number of fronts. We
see the Internet as a fundamental change in the way businesses will conduct commerce, and because of that, we
believe Divine's companies will have a big impact in the Midwest."
Local investors, based on interviews with several last week, divide into two camps. Some believe they took a risk
in an euphoric market and likely have lost.
Others believe that, despite the market reversal, Divine's prospects are unchanged.
Jim Tyree, chairman and CEO of Mesirow Financial, is a longtime friend of Filipowski who invested $15 million
for his firm before the IPO.
"Evidently it's a new concept to a lot of people," Tyree said, with more than a hint of sarcasm, "but in every single
solitary private-equity fund, right after their fundraising, values go down.
"Winners take a long time to develop. Losers occur quickly. The turmoil I see is the normal course. It doesn't
affect my judgment as to quality of Divine at all. I think it's more healthy than the wildly optimistic valuations."
Joe Piscopo, a local angel investor and former tech entrepreneur, also invested before the IPO at $6 per share,
split-adjusted. Pre-IPO investors, because they get in at a lower price, often make money even when the public
stock goes down. But in Divine's case, private investors are underwater, too.
"I knew going in that Divine [required] a long-term perspective," he said. "As an investor, I probably failed to take
into account what would happen if the market turned down."
He still hopes Divine will be good for the local tech community, but he said he didn't invest to remedy Chicago's
venture capital scarcity.
"I didn't make this investment to lose money," he said. |
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| To: Glenn Petersen who wrote (137) | 10/21/2000 7:22:28 PM | | From: James F. Hopkins | | | | About her book value, What about all the Preferred "redeemable shares" that are out ?
Something don't add up, common shares seem to have almost
no equity, it looks like almost all her book value
belongs to the "preferred redeemable"
I don't expect the big losers in the common stock to
say anything less than "we have high hopes" after all
to say less is like shooting your self in the foot.
Looking at what she invested in is like having
a nightmare.
Was she making sweat heart deals to act
as a dumping scam for junk that a few
friends held ?
Jim |
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| To: James F. Hopkins who wrote (138) | 10/21/2000 8:06:39 PM | | From: Glenn Petersen | | | | I think that all of the deals were made in good faith. Bear in mind that the mentality in the sector was more than a bit inflated when the deals were cut. We are back to reality now.
All of the redeemable preferred shares were converted into common subsequent to the offering. The Form 10-Q for the quarter ending June 30, 2000 still shows them as outstanding. Note that the offering was not completed until mid-July. The 10-Q for the September 30, 2000 will reflect the conversions. From the June 30 10-Q:
sec.gov
Conversion of Our Preferred Stock
Upon consummation of our initial public offering on July 18, 2000, each outstanding share of our preferred stock converted automatically into one-sixth of a share of our class A common stock and no shares of our preferred stock remain outstanding. |
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| To: Glenn Petersen who wrote (139) | 10/21/2000 9:52:03 PM | | From: James F. Hopkins | | | | Well taht answers my question on the Prefered & Thanx,
for the help.
While the deals could all have been in "good faith" ,
the "appearance" of some "sweet heart" deals remains.
Also I'm not sure the dot com world is back to reality yet.
And I can't see DVIN's cash flow exceeding her burn
rate for a long time to come, but I'll keep an eye
on her.
Jim |
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| To: Glenn Petersen who started this subject | 10/24/2000 12:55:02 PM | | From: deepenergyfella | | | | To put some of you DVIN 'Longs' a bit at ease let me tell you why I think DVIN isn't a complete write-off, all though at this 'moment' they do look way out of favor in the market this could be timely buying opportunity.
In Calgary, Canada they recently placed approx $40MM with a firm called Launchworks. One of the start-ups that Launchworks invested $1MM into is called Control-F1.
This summer I had 4 interviews with the company starting with tractionworks, then stormworks then control-F1. I did not end up pursuing the available position however I was very impressed with their product and business model.
I don't think Control-F1 will save DVIN's share price on its own when it goes public sometime in 2001 however based on what I saw and used, I do believe in their e-support product.
The technology that exists at Control-F1 has tremendous potential outside the channel in which they are currently selling it. In fact in my opinion it probably has a bigger market outside of what they actually designed it for which was e-support.
The brother inventors are 19 and 21 years of age, and I think they have no idea how big of a solution they have created for the e-commerce arena because currently they are focused on a sliver of their products potential market, the e-support area.
First things first I guess they do have to gain market share in the software e-support space first and then do an IPO.
I believe they are currently achieving steps toward both tasks, but as their customers and partners realize how powerful these new asp tools are, it won't take very long before some major sales,training,educational organizations license or adopt it to support other e-commerce platforms not accounted for in the existing marketing plans and then in my opinion they and their stock will be high-flying.
If you have the patience, DVIN, Launchworks and CF-1 could be stellar investments in the risk portion of your portfolio's over the next 2-3 years.
Kevin. |
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| To: deepenergyfella who wrote (141) | 10/29/2000 12:30:16 AM | | From: Glenn Petersen | | | | DVIN to restructure:
chicagobusiness.com
From the Crain's Chicago Business Newsroom
Divine faces overhaul
Some firms will go; Goose Island HQ deal unlikely
by Julie Johnsson
• October 28, 2000
Hamstrung by a weak stock and a market hostile to its incubator business model, Chicago's divine interVentures Inc. is preparing to restructure its operations. Announcement of a major revamp could come as early as next week, sources say.
In a move to preserve cash, divine CEO Andrew "Flip" Filipowski is pruning his 52-company portfolio of investments and preparing to sell or spin off, as stand-alone companies, divine's better-performing service providers in public relations, real estate and executive recruiting, according to sources familiar with the company's planning.
They also say development of the company's Goose Island headquarters is unlikely. Divine never signed off on a 1999 tax-increment financing district, and a company spokesman acknowledges that divine is "evaluating its options" on the project.
Also, Mr. Filipowski is expected to trim the company's unwieldy, 45-member board and shrink its internal operations through layoffs, sources say. One area likely to be targeted: the 40-person partner development group that's charged with scouting prospective investments.
Sources close to Mr. Filipowski say he is also mulling shifting divine's investment strategy from purchasing equity stakes in early-stage dot.coms to acquiring the assets of distressed technology companies, an area where Mr. Filipowski showed some proficiency at his former company, Platinum Technology International Inc.
"A significant restructuring is under way," confirms William Lederer, a venture capitalist and divine director, who declined to discuss the options under consideration. "If it wasn't, you'd be surprised and I'd be disappointed." |
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