LOOKING TO MAKE WINDY CITY WEB CITY: SOFTWARE MILLIONAIRE HUNTING UP $1 BILLION FOR INTERNET-FOCUSED VENTURE FUND OF FUNDS

Chicago’s brash entrepreneur Andrew “Flip” Filipowski, who last week closed Platinum Technology International Inc.’s sale for $3.5 billion, is planning a public company that could establish Chicago as a center for Internet technology.

He is talking with investors and Wall Street firms about raising up to $1 billion to create a publicly traded group of venture capital funds focused on Internet-related startups.

The company would tap the talent and wealth spun off from the sales of such local companies as Platinum, the software company Mr. Filipowski founded 12 years ago and took public in 1991.

Platinum was acquired in a cash deal by New York’s Computer Associates International Inc. Mr. Filipowski’s stake was worth $290 million. An eight-year non-compete clause prevents him from starting another software venture.

Sources close to Mr. Filipowski say he wants to enlist public-sector support for his new venture capital company from Mayor Richard Daley and Illinois Gov. George Ryan, both of whom have stressed the importance of technology initiatives.

Before Platinum’s sale, Mr. Filipowski talked with Chicago officials about developing a large Platinum facility there.

Mr. Filipowski “wants to bring a true concentration of network and computing technology to Chicago to make it a center of (Internet protocol) activity,” says a source familiar with his plans. Internet protocol is a common language used on high-speed networks.

Mr. Filipowski declines to discuss his plans: “I’m just not ready with the details to really blast it.”

Among the Wall Street firms with which Mr. Filipowski is talking is Credit Suisse First Boston, Platinum’s merger-and-acquisitions adviser.

Joe Josephson, managing director of Credit Suisse First Boston Technology Group in Palo Alto, Calif., saysthere have been preliminary discussions about forming a large venture capital fund.

“We are talking to Flip and trying to figure out what the optimal structure is,” Mr. Josephson says, noting, “It’s very much a function of the markets.

“We’re very enthusiastic about Flip,” he adds. “The notion of him as an investor in young companies is one we think could make a lot of sense.”

Mr. Filipowski also floated his idea last month to a gathering of about 50 investors in Platinum Venture Partners Inc., his main venture-investing vehicle.

long green from blues

PVP, with offices in Chicago, the San Francisco area and Winston-Salem, N.C., has helped finance such disparate Chicago enterprises as information technology consultant Whittman-Hart Inc. and entertainment-hotel venture House of Blues.

Investors include Chicago entrepreneurs like restaurateur Larry Levy, Frontenac Co.’s James Cowie, former Information Resources Inc. CEO Gian Fulgoni, investor Arthur P. Frigo, Duchossois Industries Inc.’s Craig Duchossois and Steven Devick, CEO of Platinum Entertainment Inc., a recording-studio operation.

According to people who attended the PVP meeting, Mr. Filipowski said he wanted to raise up to $1 billion in private and public money to make venture capital investments in Internet and leading-edge technologies.

In addition to investing, the new company would provide services that start-ups need, such as marketing, financial and recruiting help, as well as research and development.

One model Mr. Filipowski cited is publicly traded CMGI Inc., a Massachusetts-based direct-marketing company with stakes in more than 30 Internet ventures, including a 20% share of Internet portal Lycos. CMGI’s stock price has rocketed to about $100 from $20 late last year–at one point hitting a high around $140.

Mr. Filipowski told PVP investors that the public venture company would give ordinary investors a chance to participate in early-stage ventures–an opportunity commonly open only to wealthy investors and institutions.

He cautioned PVP investors that there are significant regulatory and legal complications to taking venture funds public, including detailed reporting requirements by the Securities and Exchange Commission.

Nonetheless, he told the group the obstacles are surmountable.

“Everybody in the room was kind of enthralled,” says Joe Piscopo, an Oak Brook venture capitalist and prolific angel investor. “If it’s done right and successful, it could be a big boon for this area.”

Crain News Service