Entrepreneur David Hayes is back with a new start-up and a new smartphone—the first UK release for nine years. Some say he's brave, others just foolish. As he admits, in a highly competitive market, who's going to have heard of Velocity?

Here's David Hayes, backpack strapped to his shoulders. Out comes his company's brand new smartphone, the Velocity 103. It's a slinky, little black number—the prevailing style in what Hayes likes to call the "convergence device space". Which, frankly, is classic geek speak. Hayes is charmingly particular, though and he has that unmistakable techie's eye for detail. "We're trying to think of a new name for it, because we don't want to call it a smartphone. Maybe we'll call it a personal media device, or a personal navigation device."

It doesn't really matter what you call it. What does matter is that Hayes's start-up, Velocity Mobile, is British, and we don't have all that many consumer electronics companies of our own. The last UK phone maker to emerge as the Next Big Thing was a company called Sendo, back in 1999. It ultimately fell out with Microsoft, its platform partner, before going bust. Hayes insists his company's relationship with Microsoft is strong. But some in the industry still suspect he might be a little barmy.

It's unusual to see a "totally new" vendor enter such an "aggressive market", says Canalys senior analyst Pete Cunningham, let alone a British one. "Nice guys, but almost a bit of a crazy thing they are trying to do." Of the other devices on the Windows platform, says Cunningham, Palm, Toshiba and HP are all shifting "pretty small quantities" of smartphones to European consumers. They "have a lot of money and experience, and they are still struggling. It's not going to be easy."

Blackberry (13.4 per cent) and Nokia (45 per cent) remain the current masters of the smartphone universe, according to research by Gartner. But Apple's iPhone is catching up fast. It might not enjoy as much market share as the leaders, but it plays a dominant role in determining the smartphone zeitgeist, making Steve Jobs the Anna Wintour of consumer electronics: just as with the editor of Vogue, when Jobs calls the trend, the rest follow. "The iPhone may not be first in market share, but it's first in mindshare," says Michael Gartenberg, vice president of mobile strategy for online images and news provider Jupitermedia.

"Apple could have launched anything and people would have bought it," says Hayes. It's an enviable position for a consumer electronics firm, particularly bearing in mind the huge amount of time and money spent on research. Hayes will have to work hard to achieve a fraction of that brand loyalty for Velocity, but, oddly, insists he's not here to compete with Apple. "I want to put on the website 'we do not compete with the iPhone'. HTC tried it with the Touch Diamond and it didn't do them any favours."

Achieving brand recognition, he says, will be a protracted process. "If you asked 100 people in the street if they'd heard of Nokia, Apple, Motorola and HTC, you'd probably get 90-99 per cent on the first three. I'd be surprised if five per cent had heard of HTC. What does that tell me? It tells me: who the hell's going to have heard of Velocity?"

A fair point. So, for the first few months, at least, Velocity will "play in the enterprise space". Says Hayes: "We're not just trying to flog product, we're trying to build a brand. If we did a global launch with our current marketing budget, we might get 10 minutes of  TV and that would be it. Until it's subsidised through an operator, the marketing will be focused on enterprises."

But Velocity will find the enterprise space just as fiercely competitive as the consumer space. That's partly because, as Gartenberg says, "the business market is not so easy to sell into", but also because the lines between consumer and enterprise are blurring. When Motorola launched the Razr, it was aimed squarely at consumers—but enterprises still bought it. RIM's new Blackberry Bold allows users to edit Microsoft Office documents—a feature the iPhone lacks—and they can also watch films in full-screen mode. Nokia's N79 and the N85, sit squarely in iPhone territory, with their larger screens well suited to video and entertainment. Even the iPhone is pitched at business users.

Battery life is another key battleground, especially for power hungry 3G devices. Hayes says his phones "deliver a full working day... on a single battery charge". It's the sort of stamina the feature-heavy iPhone has been accused of lacking. "There are compromises made every day," explains Hayes. "If you try to make the perfect product, you will never release it. Apple will tell you that. The first iPhone came out, and there were 10 software updates."

Despite Hayes's protestations, comparison with Apple is inevitable. Enterprises may ask whether the Velocity will trump the Blackberry. But consumers will ask whether it is cooler than the iPhone. Apple sets the bar. "Trying to go out and openly compete with Apple on your first day out ..." Hayes's voice tails off. "As a product, we will produce services and solutions that are different to Apple. We will bring you far more interaction between the enterprise and the consumer side. In any case, it's such a big marketplace that there's room for lots of manufacturers to work."

It might be a mistake to try to openly compete, but wouldn't it be just as suicidal to ignore the trail already blazed by such a recognised leader in innovation? After all, even the more established players see nothing wrong in aping Apple's innovative user interface. "Do I think we can compete with Apple? I think when I show you what we're gong to be launching in September next year... you tell me if you think we can compete with Apple." Is he saying the next generation of Velocity phones will unseat the iPhone? "We're going to be launching some products that are cool, I mean really cool-products that haven't been done that way before."

It's important to note that Hayes hasn't arrived out of the blue. He's been involved in the mobile sector for more than a decade and has already enjoyed partial success in consumer electronics. But his Velocity game plan is rooted in the things that went wrong—it's a chequered entrepreneurial history he's more than happy to share. Hayes first dabbled in the mobile sector in 1997, founding a company called DAT Group. He saw no future in tackling the so-called Millennium bug, deciding to take his company in a different direction. "I decided the future was mobility," he says.

Hayes became "one of the first" to match the phone and the PDA-"back then it was three times as thick, and the battery only lasted for 35 minutes"-and the product was a hit at the 1998 Commonwealth Games in Kuala Lumpur, allowing journalists to receive real-time reports of events, direct to their PDAs. There were numerous other successes. The company built the desktop systems for the Barclays Capital dealing room at Canary Wharf. But by 2005, the board was split. Now a public company, DAT was under pressure to pursue more lucrative revenue streams, such as licensing, and to convert its obvious technical know-how into confirmed orders.

Hayes, a more entrepreneurial CEO, wanted to launch new products. But with the share price under pressure, and with targets missed, the board decided its strategy required "more focus", ousting Hayes while he was on holiday. Hayes maintains he resigned, albeit with a full contacts book and some useful experience under his belt. His next venture, A Living Picture, certainly had the right product. It was a digital picture frame, technically way ahead of the curve, and cute-looking enough for consumers to covet. Six months before launch, the firm had secured a quarter of a million orders in the UK alone, a huge amount for an unknown brand. And because it was based on Microsoft technology, says Hayes, "it was case-studied at pretty much every Microsoft event"-at times by Bill Gates himself.

Surely the team could secure the funding to manufacture it? Hayes traipsed from door to door on Sand Hill Road, California, but he couldn't find a single venture capitalist to back him. He heard a range of different excuses: the margins were too low; the company was an unknown quantity; not enough customers would sign up to product services after purchase; and finally, what would happen if something went wrong—how would they deal with a load of warranty claims? "If we'd have got funding it would have been huge," says Hayes.

In the end, the founders sold the stalled business to Dubai-based electronics company i-mate. Most of the VCs' fears proved unfounded. Once it reached the shelves, almost three quarters of the product's customers subscribed for the more lucrative after-purchase services. The return rate turned out to be as low as two per cent. Hayes winces as he delivers the punchline. "Three days after selling the company to i-mate we had three VCs coming back with term sheets. They were good terms. Shit happens, right?" It's a philosophical viewpoint, considering any one of those deals would have earned him a fortune. "Be bitter about it or don't be bitter about it," he says, evenly.

Hayes is determined to avoid a repetition of past mistakes. As a result, Velocity Mobile will be privately funded by its founders-some of whom were with Hayes at A Living Picture—who will look after "the brand and product development", while Taiwanese electronics company Inventec will handle the manufacturing. That Inventec is a "partner", a so-called original design manufacturer (ODM), with responsibility for manufacturing to Velocity's tight specification, is heavily stressed. Hayes is keen to quash the assumption that Far East manufacturing automatically carries the baggage of a muddled user experience.

"You need to combine western marketing skills, software design, user experience, against the Asian [manufacturing] skillset. In Asia you get square, shiny buttons. They see nothing wrong with having a squeaky right-hand corner. One of the most expensive components on our phones are the boxes they come in. We use a custom-designed battery because we can make it 3mm thinner. With a smartphone, you better believe you'll need a huge influence on the final product."

And so on to the as-yet nameless iPhone rival: launch date, anytime from next September. It's "completely new," he tells me, "something nobody else is doing." It will be one of the first, "if not the first" phones on Microsoft's next mobile platform. So what does it look like? Well, the prototype in Hayes's hand is another slinky, black number. The four-inch screen displays a kind of virtual roll-a-dex, which spins to reveal the application you want. In this case, it's showing a high-definition film, which plays on in the background while Hayes whizzes through the other applications. A neat trick.

"This device will play 10 hours of HD 1080p video," he says, which is particularly impressive when you take into account its thickness of under 10mm. "Whereas other companies use software to make this work," he explains, "we're using physical silicon. It takes media and entertainment into a whole new world." Which sounds like something Steve Jobs might say. Hayes reverts to defensive mode. "We're never going to compete with iTunes, right? Let's be realistic." Pause for effect. "Not this year, anyway."