London's New VC Fund For Tech StartupsLondon's New VC Fund For Tech Startups

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London has taken another step in its plan to become a serious contender in the global tech investment rankings with the launch of a £22 million ($34 million) venture capital fund for British tech startups.

The MMC London Fund, to be managed by the mayor of London, is intended to support the growth of London-based businesses and will be financed by a grant from the European Regional Development Fund and SME Wholesale Finance, a London-based redevelopment body. A local VC firm, MMC Ventures, won a competitive tender to launch the fund. Both sides of the deal are putting in £11 million ($16.8 million) each.

MMC London will help companies with plans to develop software for a wide range of industries from financial services, the arts and the digital economy to leisure, education and healthcare. London mayor Boris Johnson's team estimates the funding could support around 420 jobs over the next two years.

[ While British tech startups might bloom, some other sectors lag. Read Can British Docs Give Up Envelopes As Storage? ]

"London's small-to-medium companies are a vital component of this city's economy, supporting significant numbers of jobs," Mayor Johnson said in the official launch announcement. "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."

"This fund will invest money to support fast growing businesses today, using returns from the investments to support even more companies in the future," London's deputy mayor for business and enterprise Kit Malthouse said.

Johnson and Malthouse's new VC helper, MMC Ventures, describes itself as an "active investor and award-winning venture fund manager" focused on technology-enabled sectors, specializing in fast-growth early-stage businesses, partnering with "entrepreneurs and impressive management teams" to achieve scale and profitability. It says it particularly likes to work in areas "where the U.K. is a world leader," such as financial and business services, business software, digital media and e-commerce. It says it has around £100 million ($153 million) of funds under management.

One of the first beneficiaries of the new system will be a four-year old U.K. mobile marketing outfit called Somo. "This investment will allow us to grow even faster," said Somo CEO Nick Hynes, who has opened a second London office to house his team of 20 technology engineers. Rory Stirling, investment partner at MMC Ventures, said Somo's "incredible work, client list, and growth" warranted support. "MMC backs U.K. businesses with international potential," he added. "We are confident that they are positioned to be one of the global success stories of the decade." The privately held 125-strong company has already organized campaigns for Audi, Groupon, Red Bull, News Corp and AirAsia Expedia. Apart from London, it also now has offices in San Francisco, Los Angeles, New York and Singapore.

Others who have already received cash injections from the new fund include mobile ticketing solutions specialist Masabi; a European home vacation exchange site called LoveHomeSwap; and MBA & Company, which offers British firms access to high-end advisory and research work.

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