Well, what else were they going to do with their millions? Bebo co-founder Michael Birch and Lastminute.com co-founder Brent Hoberman have teamed with friends to start European Founders’ Fund, a self-financed venture fund aiming to plug what they see as a “funding gap” in early-stage investment. The fund has £20 million, aiming to reach £50 million, all from cashed-out entrepreneurs, not banks.  Its investments are pitched between the level of angel investors and institutional VCs.

Times Online says investment levels are “plummeting” and TCUK says European investment lags behind US. But where’s the gap really? Leading VC house Index Ventures just opened a €350 million new fund for startups - Atlas, Balderton, Accel and Wellington have also created about €1.3 billion in new funds in the last year. Still, Dow Jones’ VentureSource reckons 2008 UK VC money fell 24 percent to $1.9 billion, but 54 percent in Q4.

The new fund seems designed for VCs’ own stated premise, that great ideas come out of recession. Hoberman (via Times): “We are going to see some great, disruptive companies coming out of this downturn.” It also includes Rogan Angelini-Hurll, a friend of Hoberman, and former Pipex CEO Peter Dubens.

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