BlackStar On Line For Listing After £3.57m Deal

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.

Leave a Reply