Mellon Financial Corp. is preparing to introduce its own merchant banking unit to invest in budding e-commerce projects developed within the company, by outside entrepreneurs, or by a combination of the two.
Mellon Ventures is expected to be substantially similar to initiatives at other banking companies this year. In March, for example, J.P. Morgan & Co. unveiled a strategy to invest $1 billion in e-commerce projects identified and nurtured within its own Internet incubator, LabMorgan.
Martin G. McGuinn, chairman and chief executive officer of Pittsburgh-based Mellon, said in an interview this week that the new unit would invest in e-commerce projects with the goal of either spinning them off in an initial stock offering or folding them into existing businesses of the banking company.
Several of the nation's largest banking companies have been vocal in the last year about their plans to grab a piece of the New Economy. Last summer, Bank One Corp. launched its Internet-only project, WingspanBank. com. Shortly thereafter, Chase Manhattan Corp. revealed its stand-alone Internet development unit, Chase.com, and Citigroup unveiled Citi f/i.
"Everyone has to be involved in the Internet," said Diane Glossman, an analyst at UBS Warburg. The banks that invest in these start-ups "get first dibs on new capabilities, plus they get the boost from the IPO," she said.
Mellon Ventures, like LabMorgan, lets its parent participate in the Internet phenomenon without taking huge risks on building the same capabilities in-house. However, unlike Morgan, Chase, or Citigroup, which run their own venture capital firms, Mellon has stayed away from investing in start-ups. Instead, it has focused on building two fee-generating businesses, asset management and investor services.
Analysts said Mellon Ventures could bring new opportunities to build the technology capabilities of those two businesses. "They'd get a better sense of what's out there," said Ronald Mandle, an analyst at Sanford C. Bernstein & Co.
Mr. McGuinn said he has no plan to create a dot-com venture at Mellon, but he acknowledged the importance of developing a solid Internet strategy. Indeed, an online brokerage and financial planning service is also being developed for Mellon's private bank, he said.
The WingspanBank model "is totally alien" to Mellon's direction, Mr. McGuinn said. Instead, he said, the development of Internet capabilities will be encouraged within all of Mellon's six major businesses and coordinated with Mellon Ventures.
Last fall, Mellon hired Janey A. Place to be executive vice president in charge of developing the company's electronic commerce strategy. Ms. Place was head of a consulting company, DigitalThinking.com, but before that she had worked in similar roles at the former NationsBank Corp. and Wells Fargo & Co. Since her arrival, Mellon has focused on building a common Internet infrastructure within the company, Mr. McGuinn said.
"We're committed to providing resources to rapidly build more capabilities in the important area of e-commerce," he had said in a statement announcing Ms. Place's appointment.
In the interview this week, Mr. McGuinn said of the Internet craze, "We don't want to be too early, but we don't want to be too late either."