PNC Bank Corp. of Pittsburgh has established a unit to focus on small technology and emerging growth companies.
Known as VentureBank PNC, the unit offers start-up businesses a range of products including loans, mergers and acquisitions advisory, equity placements, and treasury management.
Since bank executives conceived the group last year, they have transferred three professionals from other areas and hired seven others.
Their efforts have focused on greater Philadelphia, the Delaware Valley, and the Washington corridor. But they plan to expand soon into other East Coast venture capital hotbeds, such as Boston, said Michael Nelson, the PNC executive vice president in charge of VentureBank.
PNC's capital markets division does not have corporate debt and equity underwriting powers. It is preparing to apply to the Federal Reserve for these powers, and bank executives hope to have them by fall, Mr. Nelson said.
Mr. Nelson, who was in charge of PNC's large-cap corporate banking unit for two years before joining the venture group, said the ability to underwrite initial public offerings-what many private venture capital groups call "the exit strategy"-would help his group immensely.
The unit currently refers customers who are ready to go public to the Arlington, Va.-based IPO boutique Friedman, Billings, Ramsey & Co. PNC has a 5% equity stake in Friedman Billings.
Mr. Nelson said he thought adding corporate debt powers to the PNC menu would have less impact on his group than equity would.
"The debt piece is more important to the overall banking enterprise," Mr. Nelson said. "But small technology companies don't tend to access the high-yield markets. They tend to go directly to public equity."
Media and telecommunication companies, on the other hand, have a voracious appetite for junk. That segment accounts for about one-third of outstanding high-yield issues.
Mr. Nelson said his unit has done some work with competitive local exchange carriers, which would be among the small, emerging growth companies in this segment. But they are not the bulk of VentureBank's clients.
"We decided to cluster these capabilities because many of these small companies are not equipped to handle six or seven experts parachuting in on them," Mr. Nelson said. "They tend to be relatively thinly staffed companies with treasury operations that are not too well formed."
He also said that many of the companies his group targets have not been in sync with traditional small-business units at commercial banks.
The group recently completed one of its first transactions, a $6.5 million financing for Malvern, Pa.-based Analytical Graphics Inc. VentureBank was administrative, syndication, and documentation agent.
The deal is divided into a $2.5 million revolving credit and $4 million bridge loan. Others involved in the syndication included TransAmerica Business Credit Corp. and Ben Franklin-Progress Capital Fund LP.