Jon Miller, former CEO of AOL and now one of the founders of VC firm Velocity along with Ross Levinsohn, is in the process of raising funds to try to buy Yahoo, reports the WSJ, citing sources. The story says he has been trying to do it for months. Our sources say that the WSJ might be reading too much into this: he and his partners at Velocity have been presenting to investors all across the globe, including sovereign investors in Dubai, to raise a new fund for his VC firm. So I would not be surprised if the two things got confused along the way, and someone expressed interest in putting money into a Miller-backed consortium.

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The story says that Miller believes he can do a deal that would be worth around $20 to $22 a share to Yahoo (NSDQ: YHOO) shareholders, which means raising about $28 billion to $30 billion to purchase the entire company. I have said before that the Indian tech-media giant Reliance ADA should look at a Yahoo deal seriously, and it is likely Miller has had conversations with them, considering Velocity’s India connections (it is an investor in NDTV there, among other companies).

All that said, Velocity itself has not yet been able to close its new fund, and considering the economic market and how funds worldwide, even sovereign ones, have suffered, it is unlikely any consortium could come together to raise enough money to buy Yahoo, or even part of it. Our sources also say that both Miller and Levinsohn have met with Yahoo in the last few weeks, as part of that company’s search for a new CEO.

Miller almost got appointed to the Yahoo board earlier this year, when he was on an Icahn-backed slate of alternative board members…his nomination was nixed at the last minute due to a non-compete clause with AOL/Time Warner.

Meanwhile, Yahoo’s stock is up about 11 percent on this news… (Yahoo closed at $11.50, up 7 percent after going as high as $12.50.)