UK startup icons launch fund to bridge Europe's 'Equity gap'

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Two icons of the UK’s tech startup world are joining forces to create a new fund to address the so-called ‘equity gap’ in Europe. European Founders Capital (EFC) is being led by Michael Birch, co-founder of Bebo, and Brent Hoberman, who set up the dotcom bubble era Lastminute.com but is better known more recently for being a serial angel investor and co-founder of MyDeco.

They are joined by Rogan Angelini-Hurll, an old friend friend of Hoberman’s and former City research analyst at Salomons. Peter Dubens, who built the Pipex ISP business, is also backing the venture. Dubens sold Pipex’s broadband business to Tiscali for £210m in 2007.

EFC will have an initial £20m of seed funding but is aiming for £50m in total. The idea is to increase the availability of early-stage funding in Europe, which historically lags behind the US, and has led to a gap between early stage and Series A funding. Europe’s seed funding eco-system has never matched Silicon Valley’s in part because the business angel environment for technology is undeveloped and because European VCs have historically not reached much lower than Series A rounds, unless in syndication with other parties.

Hoberman told The Sunday Times newspaper: “We aren’t taking institutional money,” he said. “All the money comes from founders – people who have done it before… We are going to see some great, disruptive companies coming out of this downturn.”

The British Venture Capital Association recently found that member firms raised only £230m last year, a £1 billion drop compared with 2006.

The emergence of EFC is perhaps part of a wider trend in Europe. Last year Spreadshirt founder Lukasz Gadowski set up Team Europe in concert with a number of other German entrepreneurs, aiming to fund early stage startups. He was joined by Kolja Hebenstreit (early employee at Spreadshirt, and seed investor in StudiVZ).

Team Europe was itself pre-dated by the ‘Partridge Family’ of European Startups – the European Founders Fund consists of three brothers, Alexander, Marc and Oliver. The three founded Alando.de which became the market leader of internet auctions in Germany, selling out to eBay, after which they founded Jamba!, which became the market leader for wireless content for mobile phones in Europe. In 2004 Verisign acquired Jamba $273 million and in 2006 News Corp. acquired 51% $187.5 million.

It would appear then that Europe’s former founders are getting their acts together at last.

UPDATE: I just had an email from Brent Hoberman to say that there is more detail to follow with this announcement. And as has been pointed out, EFC doesn’t have a site ready yet – but stay tuned to TechCrunch Europe for more.

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