Mayor Pumps $33M Into London Startups With New MMC London Fund, TechCity To Benefit

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London is about to get a shot in the arm as a hub for UK and European technology startups that choose to HQ themselves there. For a long time the funding problem for startups here was at the Seed stage. That pain has been greatly eased in the last few years with multiple seed and early stage funding sources appearing such as Passion Capital, EC1 Capital, Playfair Capital and Hoxton Ventures for example. Now the problem is at “follow-on” and Series A of around £1-5m. Well, this issue just got easier with the announcement today that London-based fund manager and investor MMC Ventures has won a competitive tender from the Mayor of London to launch the brand new MMC London Fund. The new £11m ($16.8m) fund is specifically focused on investment in London-based businesses and is a ‘matching fund’ alongside other VCs and Angels, so that pot will swell to £22 million ($33.6m).

Because the tender was in the gift of Boris Johnson, the Mayor of London, specifically London-based startups will be the beneficiary and in particular the most deprived parts of East London, which already has an existing organic tech cluster of startups, since been marketed by the UK government as “Tech City“.

But MMC has not hung around. Today it reveals it’s already completed 5 investments from the new fund. Publicly announced so far are the investments into Masabi, LoveHomeSwap and MBA & Company. The fund is partly financed by a grant from the European Regional Development Fund, managed in London by the Mayor of London, and SME Wholesale Finance Ltd.

Masabi provides mobile ticketing solutions to travel operators; Love Home Swap is an international holiday home exchange website, and is now Europe’s biggest home exchange site; MBA & Company provides both corporates and SMEs with instant access to high-end advisory and research work.

The new fund will have a focus on software for financial services; creative industries; the ‘digital economy’; leisure; education; and healthcare. It is estimated that the funding could support around 420 jobs over the next two years.

In a statement the Mayor said: “London’s small to medium companies are a vital component of this city’s economy, supporting significant numbers of jobs. It is a top priority for me that these entrepreneurial enterprises receive practical support to thrive and grow, not least as many have the potential to become major employers in the future. This innovative equity fund is using public and private money in order to offer much needed financing when more traditional routes are not available.”

Perhaps unusually, the new MMC London Fund will set out to address particular London issues in that the portfolio will have to meet “equality and sustainability objectives” and a “portion” of the fund (this is not defined) will be focused on more deprived boroughs including Hackney and Tower Hamlets. In plain English, that means this portion of the fund will monitor itself for its investment into women and ethnic minorities and these more deprived boroughs. ‘Sustainability’ simply means providing employment and or economic growth. Hackney falls into the Tech City area.

Bruce Macfarlane, managing partner at MMC Ventures, said, “We’re looking to back entrepreneurs who will be leaders in their industries and London is brimming with talent.”

MMC Ventures usually invests in the £0.5m-£2m equity gap market, managing several funds including an open EIS fund. In 2012, MMC invested in 6 new companies and provided add-on capital to a further 7 portfolio companies, and was listed as the third most active venture investor in the UK by both Ascendant and UKFunders.