O'Brien to invest £30m in Net firms over next 18 months

ESAT Telecom founder Mr Denis O'Brien is to invest up to £30 million (€38 million) in Internet companies over the next 18 months. Mr O'Brien is set to net $287 million (€294 million) from the sale of his 14.5 per cent stake in Esat which is being bought by British Telecom and will now concentrate on Internet investments.

Speaking to The Irish Times after the First Tuesday meeting of IT companies and investors in Dublin this week, Mr O'Brien said he has already assembled the nucleus of a team to assess Internet investments. The team includes the recently appointed Mr Niall Hughes, former head of Hibernia Capital Partners. Ms Maria Mahon, chief executive of the Irish Jobs Page, is expected to be enlisted shortly to look at wider Internet opportunities.

Mr O'Brien currently has five Internet investments, which include the Irish Film and Television Network, the Irish Jobs Page and Irish Internet advertising company, ICAN (Internet Communications and Advertising Network). The other two have not been disclosed, but Mr O'Brien is understood to hold a minority stake in each.

At the moment Mr O'Brien says he is considering investing in three or four Internet start-ups valued at £3 million to £5 million. He added he may eventually consider establishing an umbrella portal which will act as a central access point to all his Internet investments.

It is understood these investments are likely to offer strong advertising platforms, as Mr O'Brien is keen to leverage the revenue potential from ICAN. He and business consultant and Esat director Mr Leslie Buckley took an 80 per cent stake in the company last year.

"The ICAN investment was largely to try to get a grip on online advertising and consider the advertising possibilities for the other sites. In four years time I believe the Irish Internet advertising market will be equivalent in value to that of the independent local radio market, which is currently worth around £40 million," Mr O'Brien said.

Addressing the record crowd of 700 attending the First Tuesday event, Mr O'Brien offered a number of pointers to companies starting out on the Internet road. He described Esat's evolution as a "white knuckle ride", with the company running out of money on about six occasions. Mr O'Brien urged entrepreneurs to stick to their convictions, but not to commit to an unworkable idea if it's still not working after two years.

"If you fail . . . get your friends and investors together and say `we're going down'. If you haven't behaved recklessly there's no shame in it. In fact, in the US it's a badge of honour to raise venture capital a second time around."

Mr O'Brien said far too much emphasis was placed on writing business plans, and people should spend the maximum of one week drawing them up, enlisting the help of more experienced people.

"I spent two years writing up my first business plan, and by the time I'd raised the first £100,000 the market had moved and the opportunity was gone."

He said a lot of time could be saved and mistakes avoided by travelling to see how competitors at a later stage of development are getting on. He warned of confusing personal lifestyle with the company lifestyle when getting started. Invest in second-hand furniture, and avoid the temptation to buy a BMW out of company funds, he said.

When raising funding, Mr O'Brien said a great deal could be learned by pitching to as many venture capital companies as possible, even though the ultimate goal may be to raise a large tranche of funds from a major player. "By talking to the small players you get to practise your pitch, and hear all the possible objections, so you know what you're up against when the real gig comes along."

Illustrating the risk of doing business with a difficult investor, Mr O'Brien recounted a story of a businessman who promised to invest £150,000 in Esat in the early days in return for a 10 per cent stake. The investor held off providing the money until Esat was running out of cash, and then said he would only invest £100,000 in return for 50 per cent of the company. The offer was flatly rejected.

Then, following the ESAT public offering in November 1997, the Esat management team - in jubilant form - were returning from New York, only to meet the spurned investor on the same flight. Mr O'Brien said he had to do everything in his power to get his chief financial officer to stop haranguing the man who, had he taken up his original investment, would have then reaped around £75 million.