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Google creates $100M fund to back European startups

The Big G's investment arm Google Ventures is sending $100m to Europe to fund the next Spotify, Soundcloud or Skype.

A venture capitalist, yesterday Elnur/Shutterstock

Google is popping down the bureau de change and changing $100 million to euros to try and find the next Spotify or Skype. The search engine giant is establishing a London office for the Google Ventures investment fund to back European companies.

Founded in 2009, Google Ventures is an arm of the Big G that provides venture capital, pumping money into new companies to get them off the ground or develop their ideas. With offices in Silicon Valley, San Francisco, Boston and New York, Google Ventures currently invests $300 million annually and manages $1.5bn in assets. Companies that do well might end up being fully absorbed into Google, like home automation company Nest earlier this year.

The new European venture has an initial fund of $100 million to spend. The partners in charge of the fund are entrepreneur Tom Hulme; the co-founder of fashion accessory website Boticca, Avid Larizadeh; angel investor Peter Read; and the founder of the Google Campus startup hub in London, Eze Vidra. They'll be joined on a temporary basis by former technology blogger MG Siegler.

The fund will set up shop in Clerkenwell in London, a stones throw from the startup-dense hipster heartland of Old Street, nicknamed Silicon Roundabout -- a play on "Silicon Valley". The area is also known to the squares in government as Tech City.

Google Ventures landing in the UK isn't just good news for the moustachioed entrepreneurs of East London, but should also be a good thing for startups across Europe. Other European hubs of innovation include Berlin, Stockholm, and the "Silicon Fen" area around Cambridge University.

'Future rockstars'

"We believe Europe's startup scene has enormous potential," says Google Ventures managing partner Bill Maris announcing the new fund in a blog post. "We've seen compelling new companies emerge from places like London, Paris, Berlin, the Nordic region and beyond: SoundCloud, Spotify, Supercell and many others."

Other European success stories include music-themed Deezer, Songkick, Shazam and; hardware manufacturers such as Withings; and gamers Mojang, the company behind "Minecraft", and Rovio, which took flight with "Angry Birds." That's not to mention Mind Candy, which has over 80m users playing "Moshi Monsters" around the world, and Skype, which was acquired by Microsoft for $8.5 billion in 2011.

"The European tech startup scene is booming," says entrepreneur Kate Unsworth, co-founder of wearable technology jewellery company Kovert. "With a multi-national talent pool and an inherent understanding of contrasting markets and cultures, European startups think globally from day one. I have no doubt they'll back some future rockstars."

'Google is rather late'

The new fund is hailed by Stephen Roper, Professor of Enterprise at Warwick Business School and Director of the Enterprise Research Centre, as "another welcome signal of confidence in European high-tech industry. European high-tech firms have often looked enviously at the supply of risk capital available across the Atlantic. The arrival of Google Ventures in Europe takes us some way to redressing the lack of risk capital in Europe."

But Professor Roper adds that "Google is rather late into this arena, with companies such as Intel Capital already having a well-established portfolio of European tech investments... Perhaps more valuable than the investment to Europe's high-tech starts," he notes, "is the potential relationship with Google itself, its technologies and market position."

"As to whether Google are on a technology shopping spree or have a real interest in building Europe's next generation of high-tech gazelles, only time will tell."