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.

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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.