Nov. 27–Michael Campbell, the executive who last year took over struggling Downtown technology firm PanGo Networks, may move to Boston if he can close on a $4.3 million venture capital deal thatincludes $2 million from Boston-based IDG Ventures and $350,000 from Innovation Works, the taxpayer-funded nonprofit charged with supporting local tech start-ups.

The deal would be huge win for PanGo, which needs the money to stay alive.

But why is Innovation Works, an organization designed to “increase the new enterprise success rate in southwestern Pennsylvania,” investing $350,000 in a company planning to move its top officer and its de facto headquarters out of state?

For a company to be considered by Innovation Works, it either “must be located in, or agree to relocate to, southwestern Pennsylvania,” according to the organization’s Web site. What’s more, the charter that governs the state-funded Innovation Works asks that any company receiving money keep a “significant presence” in Pennsylvania, according to a state spokesman.

Florri Mendelson, Innovation Works’ president and chief executive officer, argues that while Campbell may move to Boston to be closer to Boston-based IDG, the company will not be relocated altogether.

She expects Campbell to keep some employees in Pittsburgh, where PanGo has an office Downtown, and perhaps even hire more people, including a vice president of marketing. The company, which develops software for handheld portable computer networks, employs four currently.

As long as the company keeps a “presence” in the area, Mendelson said, the deal does not contradict Innovation Works’ mission. In fact, “We think this is a huge win,” she said

The goal, she added, is for Innovation Works to “expose our companies to investors all over the United States and to get exposure for Pittsburgh. That is very much what this deal has done.”

In recent years, Innovation Works has become a big financial supporter of PanGo, providing $590,000 to a firm launched in 1999 by a Carnegie Mellon University computer science graduate and three other partners.

Despite raising a total of $1.1 million in financing, the company failed to develop customers or a sales and marketing force to attract them. By the end of 2001, PanGo was out of cash, in default on its loans and on the verge of either bankruptcy or being sold to an out-of-town company.

Campbell, a 39-year-old marketing consultant who has lived in the Pittsburgh area for the last 30 years, agreed in early 2002 to rewrite the company’s business plan, raise new money and run the company as its CEO. He convinced Innovation Works to provide another $290,000 in March 2002.

But PanGo still needed more money, or “the company could cease to exist,” Campbell said. Campbell began negotiating a deal, which could close in the next week or so, to get another $350,000 from Innovation Works, $2 million from Boston venture capital firm IDG Ventures and another $2 million from Alexandria, Va.-based Columbia Capital.

Campbell declined yesterday to confirm the details of the deal, saying that he could not talk until it was final. Nor would he talk about the possibility of a move to Boston. He did say, however, that “Pittsburgh is where this company was created. There is no reason to believe it won’t always have a presence” here.

As for Innovation Works, the decision to give PanGo more money as it contemplates a partial move to Boston is perhaps reflective of a changing investment philosophy.

Mendelson’s predecessor, Doug Goodall, said he never provided funding in cases where the company attracted venture capital from outside the area. “We thought our job was done when they got venture capital committed. The assumption was they didn’t need us anymore. Sounds like Florri (Mendelson) is moving up the ladder a bit.”

Goodall also said he was not sure if he would have approved the last PanGo investment. In the end, he said, it’s a “judgment call.”

Mendelson, though, stands by her decision. “The more we can get investors to look at Pittsburgh, invest in Pittsburgh, and keep employees in Pittsburgh, the better off the region is and the state is.”

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