Fifty-six southwestern banks - none large enough to pursue venture capital initiatives alone - have united to create the first small-business investment company owned exclusively by community banks.

The Independent Bankers Capital Fund LP of Dallas has $70 million in its coffers and will invest in light manufacturing and distribution, sectors that are "starving for capital," said Barry B. Conrad, the fund's manager.

In the next five years, the fund will make 25 to 30 investments, each of about $2.5 million, Mr. Conrad said.

It has already completed its first deal, investing an undisclosed amount in an Athens, Texas, manufacturer of medical supplies, said Gayle M. Earls, the president and chief executive officer of Independent Bankers Bank in Dallas, a $664 million-asset correspondent bank that helped spearhead development of the Independent Bankers Capital Fund.

The fund's strategy is a departure from that of most venture capital funds, which deal almost exclusively with high-tech companies.

"None of us were well schooled in high-tech," Mr. Earls said. "I do not think you are going to find a community banker in a small town in Texas who is."

Mr. Earls said he does not expect the windfalls that backers of tech start-ups have enjoyed but that most of the companies will be profitable.

"There are not going to be any cases where we invest $1.5 million and collect $400 million," he said, "but there are going to be a lot of instances where we invest $1.5 million and collect $3 million, which will satisfy everyone, I think."

Profit was not the only motive behind the creation of the fund, Mr. Conrad said. The idea was also to give community banks another tool for serving their small-business customers.

"If a loan is inappropriate for whatever reason, the bank does not have to say, 'Sorry, I cannot help you,' " he said. "Now they can offer this other service. It puts them in a better position to sustain long-term banking relationships."

Moreover, the fund, which got started in February, promises to invest in areas of Texas that venture capitalists typically ignore. Mr. Earls said 90% of the venture capital money in Texas goes to Dallas, Houston, Austin, and San Antonio.

"Having 56 community banks as backers gives us an opportunity to see things in parts of the state that would not have been visible using only our traditional networks," he said.

The first small-business investment company was created 42 years ago. Most are privately owned, though the Small Business Administration licenses them and supplements their capital by guaranteeing low-cost loans and purchasing their preferred stock.

The SBA says it has invested $19 billion in about 64,000 companies since 1958. A few - Federal Express, Apple Computer, and Intel - have grown into corporate behemoths.

Regional banks, large banks, and independent venture capital funds dominate the ranks of small-business investment companies. There are 369 such companies and big banks own about 100 of them. The rest are independent, though about 70 count banks among their minority investors, said Don Christensen, associate administrator for investment with the SBA.

Mr. Conrad said any profits would probably come after the fund's fifth year. Profits would be distributed among investor banks.

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