Archive for August, 1999

Videos from cyberspace

Sunday, August 22nd, 1999

It is a common complaint. You go to the video store looking to rent a film for the evening, only to spend what seems like an inordinate amount of time finding something you might actually want to watch but have not seen before.

And the situation is not much better when it comes to buying videos. Even the largest shops sell only a fraction of the 50,000-odd titles available in Britain, where the market for video and DVD is worth £1bn a year.

Which is why three young entrepreneurs from Belfast saw an opportunity to make their contribution to the e-commerce revolution. And it seems their hunch was right, since BlackStar, the internet video sales company created by Darryl Collins, Tony Bowden and Jeremy Glover, is one of the few internet start-ups to be making any money.

Set up in an office above a builder’s yard just 18 months ago, it has just secured a second round of funding. It has raised $6m (£3.8m) from Atlas Venture, a specialist in financing technology firms, and from investors in Texas Pacific Group, the firm that has recently been involved in deals with Punch Taverns and Ducati motorcycles. And this will be used to fund infrastructure and marketing initiatives aimed at helping prepare the fledgling company for competition.

Such is the rate of progress that the latest financiers, who are building on the investments made by local business angels when the company was started at the end of 1997, could be seeing a quick return on their money. BlackStar, which is chaired by James Osborne, the prominent Irish entrepreneur who oversaw last year’s flotation of Ryanair, is looking to go public in the next 18 months, via either the London Stock Exchange or New York’s Nasdaq exchange.

Much impressed by the example of Amazon.com, which revolutionised the book trade before moving into selling other products online, BlackStar’s three founders say they have got to this position through an absolute dedication to customer service.

Mr Collins, an award-winning film maker who came up with the idea of BlackStar with Mr Bowden, a video fanatic, says that from the start they have asked people what they liked about the service and what they felt could be improved. “We’ve had constant nudges towards what has turned out to be obvious.”

As an example, he cites how one early customer suggested that the company publish films’ catalogue numbers on its website at www.blackstar.co.uk. That way, said the customer, dedicated fans like himself could tell at a glance whether the film would be of interest. BlackStar made the change within half an hour, says Mr Collins, pointing out that many larger companies might have asked consultants to look at the issue first and so wasted valuable time.

This reputation for paying a lot more than lip service to customer service has won the company customers all over the world. It has, for example, built up such a strong relationship with a customer in Turkey that he recently visited Belfast specifically to see the people he had been dealing with electronically.

“We took him out to lunch and he’s an even better customer now,” says Mr Collins. A German fan, who was one of the company’s first customers, regularly sends chocolates.

BlackStar, which is planning to have 75 employees – still at the original office – by end of the year, is living proof of how the internet can change the economics of business. If a little-known start-up based in a part of the world hardly associated with high technology can promise to supply customers in 95 countries with videos from a list of 50,000 within days, just about anything is possible.

But, although it is the web that has given them their opportunity, the company’s founders are not blind to its limitations.

First, for all their nods to Amazon.com, they insist that their business model is much more in line with a conventional retailer than the mail-order operations that most e-commerce ventures adopt. The price the customer sees quoted is what they pay and there are no hidden costs. Moreover, delivery, which is promised within 48 hours in the UK, is free and the process is tracked until the package reaches the customer.

Second, BlackStar realised from the start that brand building has to be done using conventional media in the “real” rather than virtual world.

It is this confident approach, the company believes, that has attracted investors, and will help it reap even greater rewards.

Allure of Emerald Isle

Friday, August 20th, 1999

Ryanair chairman, David Bonderman, seems well and truly enamoured with the island of Ireland as a location to invest.

This week, Mr Bonderman and two of the founding partners of his investment vehicle, Texas Pacific Group, joined with the US venture capital group, Atlas, to take a $6 million (€5.8 million/ £4.6 million) equity stake in the Belfast-based Internet video company.

Together TPG and Atlas have taken a 33 per cent holding in the Northern Ireland company which is toying with the idea of floating either on the London market or Nasdaq in the next year to 18 months.

The bulk of TPG’s investments are in the airline sector with substantial holds in the US Continental and America West airlines. In the Republic, TPG is a shareholder in Ryanair and is the biggest shareholder in the Irish aviation group AerFi. TPG also has investments in a range of companies in the entertainment and e-commerce sectors with shareholdings in groups such as Virgin Entertainment.

Mr Bonderman’s introduction to BlackStar was undoubtedly through his Ryanair boardroom colleague, James Osborne, who is chairman of the Belfast-based group. His involvement is a boost for BlackStar which is rapidly becoming one of the biggest Internet retailers of videos and digital video disks in Britain.

Internet video firm creates more jobs

Thursday, August 19th, 1999

An online video retailer in Northern Ireland is to create 75 jobs after securing major international investment. BlackStar, based in Belfast, generates profits from a vast store of more than 50,000 videos and digital video disc titles. It is rapidly expanding and hopes to float the company on the stockmarket.

Set up 18 months ago, the company is a relative newcomer to the Internet and says it needs cash for a loud marketing campaign to fight its high street rivals.

But already Atlas Venture, which specialises in investing in technology focused companies, together with a group of Texas businesses, have invested $6m in the Northern Ireland company.

As a result the firm is now having to triple its workforce. Director Darryl Collins says the company is expanding by the week as the Internet business grows. “As of last week we had 24 employees,” he said. “I think this week its 36. With the sort of growth rates that we’re having to anticipate, it’s quite possible that that will be 100 by say March next year.”

BlackStar hopes the funding will help propel it further into the world of electronic commerce, and that this could be one of the first Internet-related flotations for a Northern Ireland company.

BlackStar was started by three young people on an old pingpong table in an office on the Ravenhill Road in Belfast. The company claims revenue growth has surged by more than 30% every month from a loyal customer base spanning 95 countries.

It does not have any any high street outlets and therefore say they have significantly fewer costs.

The UK company says they are, however, managing to challenge US online giants to some extent, because video formats are incompatible.

Starring role for video shop

Thursday, August 19th, 1999

A DYNAMIC young online video store is set to enjoy a new starring role thanks to a £3.8m investment boost which will create 75 jobs in Belfast and London.

Northern Ireland- based internet retailer BlackStar has secured a multi-million pound investment boost from Atlas Venture and a group of Texas investors. Atlas Venture is a technology and e- commerce venture capital firm and the Texas investor group has an investment portfolio which spans Virgin Entertainment and Ducati motorcycles.

BlackStar, established just 18 months ago by three partners, has become one of the fastest growing internet video and DVD retailers in the UK. It offers more than 50,000 titles in its online store – the average high street store stocks around 2,500 – and boasts customers in 95 countries across the globe.

BlackStar now plans to use its new investment capital to fund infrastructure and marketing initiatives on a worldwide basis. The directors of the company also hope to float BlackStar public either on the London Stock Exchange or Nasdaq within the next 12 to 18 months.

Meanwhile, business experts today warned employers to take their first steps on the information superhighway or risk being run over in the rush. The computer network allows low cost access to a global marketplace which was once the territory of international firms only.

Consumers can browse through and purchase a huge variety of goods and services, from pizza delivery to divorce lawyers, using computers and credit cards. Many small firms in Northern Ireland have already won new business by advertising their services on the Internet including Graham and Sons in Omagh which prints postcards for the Falkland Islands.

The Ulster Bank is to introduce internet banking for its largest customers next month. Paul Clarke, a partner at Deloitte & Touche in Belfast, said: “The Internet is becoming less of a technology issue and more of a business issue.

“Growing businesses that fail to embrace e-business will find their customer base dwindling as more companies develop business on the Internet.”

BlackStar backed by US venture capitalists

Thursday, August 19th, 1999

BlackStar, a Northern Ireland-based internet company offering online videos and DVDs, yesterday said it had secured private equity backing from two US venture capital houses and planned to float within 18 months in London or on Nasdaq in the US. Texas Pacific Group, a US venture capital company headed by David Bonderman, the investor, and Atlas Venture are together paying $6m (£3.8m) for a 33 per cent stake in the company.

BlackStar was founded last August by three film enthusiasts and claims to be the UK’s largest online video retailer with 50,000 titles. The company, which has so far invested £200,000, said it was profitable before advertising expenses. Revenues were increasing by 30 per cent a month, with annualised sales of about £10m to customers in 95 countries.

The International Video Federation estimates the size of the UK video and digital video disc market at £1bn. Fletcher Research, the consultancy, has forecast that online video sales in Europe – which accounts for 70 per cent of BlackStar’s current market – will be worth about $18bn by 2004.

The new investment will be used to beef up BlackStar’s marketing effort and improve technology. The group will create 75 jobs over the next six months in Belfast and London. The company’s three founding directors, Jeremy Glover, Darryl Collins and Tony Bowden, bring together film, marketing and internet experience.

Mr Bowden, who studied theology at Queens University in Belfast, developed Ireland’s first internet design agency, which he sold to Anderson Advertising in 1996. Mr Glover, sales and marketing director, worked for 15 years at McCann Erickson, the advertising agency.

“The new finance recognises the success of our business model and positions us for aggressive growth,” said Mr Collins, a film producer.

James Osborne, former senior partner of A&L Goodbody solicitors in Dublin, who has brought a number of Irish companies to the market, is chairman. As a director of Ryanair, he was closely involved in floating the Irish airline, and was instrumental in introducing BlackStar to Mr Bonderman.

US investors back BlackStar

Thursday, August 19th, 1999

BELFAST-based BlackStar, has secured a £3.8 million international investment that will create 75 new jobs over the next six months.

Since its formation BlackStar has captured a clear lead in the UK e-commerce market over the past 18-months to become the UK’s largest internet video and DVD retailer.,

The investment from Atlas Venture Ltd and a group of Texas investors will be used to fund infrastructure and marketing initiatives to propel BlackStar onto the world e-commerce stage.

The company has also revealed plans to become a public limited company, floating on the London stock exchange or NASDAQ within 12 to 18 months.

Darryl Collins, one of three founding directors of BlackStar said: “The new finance recognises the success of our business model, brings heavyweight investors to our board and positions us for aggressive growth.

“We have grown to have a significant customer base in 95 countries and for the sort of competition we are likely to face in the future, we need to have a war chest to take on all comers.”

BlackStar’s main competition comes from the high street. However as BlackStar’s director Jeremy Glover insisted the company is revolutionising the way peoples shop for videos.

“If you look at high street stores they carry 5 per cent of what is actually currently available and so it is very restricting by shelf size and not everyone lives close to a Virgin or an HMV store,” he said.

BlackStar offers more than 50,000 videos and DVDs in its online store at www.blackstar.co.uk. This compares with the 2,500 typically stocked by a high street retailer.

As an early stage internet firm, BlackStar is in the unusual position of generating actual revenue and profit, with revenues growing more than 30 per cent month-on-month since their launch early in 1998.

Online purchases in Western Europe, which accounts for 70 per cent of BlackStar’s current market, is predicted by Fletcher Research to grow to over $18 billion by 2004.

Although BlackStar will maintain their Belfast distribution base, it will also be setting up a new sales and marketing office in London.

The reasoning for the expansion to London is twofold. “It is getting close to the film distribution companies and it is also building relationships with the media in general,” said Mr Glover

The jobs will be in a wide range of areas including graphic designers, programmers, pickers and packers, customer service, administration, finance and fulfilment with recruitment ongoing.

Atlas Venture is an international technology and e-commerce venture capital firm which has invested in companies such as Confetti and Egroups.

The Texas investor group includes members of the Texas Pacific Group who have been especially active in Europe with significant investments including Virgin Entertainment.

“BlackStar is one of the very few Internet start-ups in either the US or Europe that is generating real income. In fact its balance sheet looks more like that of a traditional retailer than an Internet start-up. Through its obsession with customer fulfilment and satisfaction, the company has a strong lead in a fast growing market niche,” said Vic Morris of Atlas Venture.

Bonderman Part Of £3.8m Funding Package For BlackStar

Thursday, August 19th, 1999

The Belfast-based internet video retailer, BlackStar, has secured a $6 million (£3.8 million sterling) investment from the US investment group Atlas Venture and a consortium of investors lead by Ryanair chairman, Mr David Bonderman.

BlackStar, which sells videos and digital video discs (DVDs) over the internet to customers in 95 countries, plans to use the funds to invest in further infrastructure and marketing initiatives.

The company is also considering going public over the next 12 to 18 months and may seek a listing on the London Stock Exchange or NASDAQ.

One of the three founders, Mr Daryl Collins, said the company is growing at a rapid rate and is well positioned to benefit from the huge growth in online video purchases. It currently employs 36 people in Belfast and expects to employ a further 75 within the next six months.

Atlas Venture and Mr Bonderman’s consortium have acquired about a third of BlackStar’s total shareholding through its investment. Atlas Venture is a technology and e-commerce venture capital firm which has invested in companies such as Confetti, Moreover and EGroups. Announcing the investment yesterday, Mr Vic Morris of Atlas Venture said BlackStar was one of the very few Internet start-ups in the US or Europe that is generating real income. ‘Its balance sheet looks more like that of a traditional retailer than an Internet startup.’

Mr Bonderman is joined by two of the founding partners of his investment vehicle Texas Pacific Group (TPG), Mr James Coulter and Mr William Price. TPG, which has substantial investments in Ryanair and the former GPA which now trades as Aerfi, also holds investments in Virgin Entertainment.

Mr Bonderman’s board room colleague at Ryanair, Mr James Osborne, is chairman of BlackStar. Following the investment Atlas has appointed Mr Morris to join its board as a non-executive director while TPG has appointed Mr Dipanjan Deb as its representative on the board also as a non-executive director. BlackStar was founded last year by Mr Collins and fellow directors, Mr Tony Bowden and Mr Jeremy Glover. The three directors own around 66 per cent of the company.

BlackStar offers more than 50,000 videos and DVDs at its online store selling to customers all over the world. The market in the UK is currently estimated to be worth around £1 billion sterling annually with growth in western Europe predicted to rise to more than £11 billion sterling by 2004. ‘BlackStar has captured a clear lead in the UK market in 18 months, selling videos and DVDs over the Internet. The new finance recognises the success of our business model, brings heavyweight investors to our board and positions us for aggressive growth,’ Mr Collins said.

BlackStar On Line For Listing After £3.57m Deal

Thursday, August 19th, 1999

Internet newcomer BlackStar, the online video store, said today that it wants a listing in London or New York after securing a £3.57 million shot-in-the-arm from Atlas Ventures and a group of Texans.

International venture capitalists Atlas and the Texans – including David Bonderman of leveraged buyout specialists Texas Pacific, which has earned a reputation for spotting undervalued situations – will be taking a 15 per cent stake each.

Altas specialises in investing in technology focused companies. Financial wunderkind David ‘Bondo’ Bonderman, from Texas Pacific, is best known for piloting Houston-based Continental Airlines out of bankruptcy in 1992.

Belfast-based BlackStar, which is seeking a listing either in London or on Nasdaq in 12 to 18 months time, is one of a small number of Internet groups to be generating profits from a vast, online store of more than 50,000 videos at www.blackstar.co.uk.

Set up 18 months ago, the group says it now needs the financial muscle for a ‘loud’ marketing campaign to fight heavyweight high street rivals such as Virgin Megastores, part of billionaire Richard Branson’s Virgin Group empire.

‘We need to prepare ourselves and gather a war chest to drive the marketing,’ Mr Darryl Collins, one of BlackStar’s three founders, said. ‘We’ve learnt a lot of lessons over the last 18 months about the sort of things that can trip us up. But using the marketing muscle that we’re about to get, we should be able to see growth going spectacularly for at least the next year.’ BlackStar hopes the funding will help propel it further into the world of electronic commerce, which is becoming increasingly crowded with the likes of Reel.com to giant Amazon.com slugging it out with a growing number of upstarts. But the UK group says it has been protected to an extent from U.S. online rivals because video formats are incompatible – although any advantage could be limited by the advance of multi format decoders.

For the moment, however, BlackStar’s main competition lies in the high street. Without its own high street presence, the group has significant fewer costs. But it said it may consider a ‘click and mortar’ virtual and physical presence in the future.

BlackStar sells videos at retail price, with free postage and aims to ship goods within 24 hours. It says turnover growth has surged to more than 30 per cent month-on-month from a ‘fiercly loyal’ customer base spanning 95 countries. About 70 per cent of sales are repeat purchases.

Most high street retailers stock about 2,500 to 3,000 videos and the online and offline British market, including sales of digital video discs, is valued at around £1 billion per year.

Collins says 20 to 30 per cent of those sales are forecast to be secured online within the next five years.

Online sales in western Europe, which accounts for about 70 per cent of BlackStar’s current market, are expected to grow to more than £11 billion by 2004, according to market research group Fletcher Research.

BlackStar could soon be in ascent

Thursday, August 19th, 1999

Video online retailer BlackStar might just be a Net star of the future. It has secured an investment of £3.8 million from Atlas Venture and a bunch of Texans. Not bad for the Belfast business launched early last year with its initial stock balanced precariously on a table tennis table. Now it offers 50,000 videos online at www.blackstar.co.uk compared with a typical 2500 from your average High Street retailer. It claims customers in 95 countries and, unusually, to be generating profits on a turnover that has long since steamed past the £1 million mark. When so many lossmaking Internet stocks are trading at massively inflated prices, BlackStar could just be worth watching should it go public late next year, as seems quite likely.

Texans sink $6m in BlackStar

Monday, August 16th, 1999

BlackStar, an online video and DVD retailer, has not only made some money this year, but has managed to secure financial backing from US venture capitalist group, Atlas Venture. The Texan investors are parting with $6 million for a 33 per cent stake in the business.

One of BlackStar’s founders, Jeremy Glover, said that about half the money would be spent on marketing and promoting the company, and the other would be spent on expansion. “By the end of the day we will have twice as many employees. We’re also opening a London branch, and should be employing 75 people in Belfast and London in about six months time.”

The video and DVD market is worth about £1 billion in the UK at the moment, and is expected to reach £18 billion in Europe by 2004. BlackStar has customers in 95 countries, but Western Europe still accounts for 70 per cent of its business.

The three founders, Jeremy Glover, Darryl Collins and Tony Bowden, attribute the company’s early success – revenue growth of about 30 per cent a month – to a focus on customer care, and providing a slightly different service to other online stores.

“When we started, there was still a lot of worry about security of online shopping, so we had to bend over backwards to get customers to trust us. Personalising the service is important, but at the end of the day it is your relationship with your customers that keeps you in business.”

“The high street can’t really afford to ignore us,” says Glover. “There are some already online, like HMV and WHSmiths, but I think they are finding it hard to adapt to an online environment. They are still only stocking 2,000 to 3,000 titles, while we stock around 50,000 – the whole catalogue of titles available in the UK.”

The site is here and is nice and easy to navigate.