PacketExchange, the London-based start-up that allows website owners to bypass the overloaded “public” internet, is eyeing an IPO that could value it at up to £250 million.

Today the group will add Piczo, a social network that boasts 25 million users, to a client list that already includes the online heavyweights Google, Yahoo! and Microsoft. The privately owned company is also in talks this week that could bring Silicon Valley venture capitalists on board.

Founded in 2001, PacketExchange allows website owners to sidestep the patchwork of internet service providers (ISPs) that forms the public internet to pipe content directly to consumers’ homes.

It has deals in place with ISPs including BT and Virgin Media, Britain’s two largest, and works by linking their customers to websites via dedicated tracts of super-fast fibre-optic cable. Its system covers 75 per cent of the UK’s 14 million broadband connections and spans the United States, Europe and Asia.

The model is turning heads as data-heavy video and audio services stretch the internet to breaking point, risking a global slowdown. Meanwhile, plunging broadband prices have left ISPs with little cash to spend on upgrades.

Cisco, the hardware giant, predicts that by 2010, 20 homes will generate as much network traffic as the entire internet did in 1995. Already YouTube, the video site, sends data equivalent to 75 billion e-mails a day.

The convoluted path of web traffic can also cause delays. The average e-mail travels over 20 separate ISP networks – the “public” web – before reaching its destination.

Kieron O’Brien, the PacketExchange chief executive, said: “What we are doing – ensuring sites stay fast and secure – is in vogue. If website owners keep users happy, other metrics, like advertising, line up.”

According to estimates, PacketExchange will post revenues of about £10 million this year and is seeing sales grow by 85 per cent a year. It could command a valuation in the region of £150 million to £250 million, analysts said.

Its original backers included HBOS and Esprit Capital Partners, the former Cazenove Private Equity.

Profitable 22 months after starting out, the management have won notice in the US tech belt. “Successful 2001 tech management teams are a rare vintage,” one West Coast venture capitalist said.

A report from Gartner, the analysts, yesterday highlighted fears among a significant number of web users that services such as PacketExchange’s could lead to a two-tier internet, where small sites are left in the slow lane as large groups pay to have their website content prioritised.

However, academics say that the internet is so riddled with flaws that the only answer is to scrap it and build a brand new one from scratch.

The web “works well in many situations, but was designed for completely different assumptions”, Dipankar Raychaudhuri, of Rutgers University, said recently. “It’s sort of a miracle that it continues to work.”

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