Birch founded 'tween' social network Bebo with his wife Xochi in 2005 before selling it to AOL in March 2008 for a whopping $850m.
At the time the site was the second largest social network in the UK behind Facebook, attracting 22 million unique visitors and 11 billion page views, according to data from Comscore.
This month Bebo will discover whether parent company AOL will shut down or sell the site, following the "strategic evaluation" AOL announced at the beginning of April. Bebo's financial results for the 12 months to 31 May 2009 revealed its UK revenue dropped 29% year on year to £6.25m.
At Punktilio, which was founded last year by former Bebo global head of music Hal Stokes, Birch will take on an advisory role to help grow the agency. The investment is intended to enable Punktilio to compete with larger agencies that are moving into the social media space.
Stokes comments: "Social media is the glue that binds digital and above-the-line marketing together; it's our intention to be the leaders of that booming reality - from creative to strategy, media buying to app builds."
Birch said: "The social space is now a visible reality, and it's only going to get bigger. Few people truly understand it, particularly from a brand perspective but everyone involved with Punktilio has worked on both sides of the fence so the knowledge and skills are unparalleled."
Punktilio clients include Phones 4 U, Arsenal FC and Simon Cowell's SyCo Music label.
