The Hunter Davies Interview: Dr Waldern's dream machines: Arcade thrills for spotty youths today, but revolutionary tools for surgeons and architects tomorrow, says the pioneer of virtual reality

Who says British initiative is dead? Who says we can't produce world leaders? Who says that nice, clean-cut, well-spoken, awfully wholesome young men can't win?

We're on the outskirts of Leicester, standing in front of a really boring prefab-looking building called W Industries in a small, soulless industrial estate. Next door's unit is called Rags Fashions. Across the road they're making some sort of glass.

Admire the lack of atmosphere, the dead-end road, the empty pavements. Wonder what on earth 'W' Industries might mean. Then notice something very strange. The two-storey building has no windows. Yet inside are 70 workers; only the girl on reception can see daylight. Everyone else is cut off from reality. No windows means no distractions for the workers. No windows means high security.

This little building is the home of Virtuality (it's a new name; they still haven't got round to taking down the old one). Last month, Virtuality was floated on the Stock Exchange. Shares started at 170p and reached 315p on the first day, making the firm worth pounds 75m. Its founder, Jonathan Waldern - that's where the W came from - is worth more than pounds 7m. Several of his colleagues, hidden inside, also became overnight millionaires.

Dr Waldern is 33, young enough to be a nerd, but he doesn't look it. Very smart in his dark suit, neat hair, charming manners, modest demeanour, public-school accent but with mid-Atlantic overtones. That's partly due to all the travelling to the States he's done for the company in the last two years. Repeat two years. This is a story so new that by the time I've told it to you it will be out of date.

His best-selling unit is a CS 1000 (CS equals Cyber Space). I'd heard of virtual reality: something to do with putting on a funny-looking helmet and gloves and entering a three-dimensional world - and that's exactly what happened when I tried the CS 1000 for myself. I stepped into what looked like a fairground bumper car, and strapped on to my head what felt like a motor-bike helmet. Dr Waldern did the same, giving me instructions on what to do. That was hard. I've never played computer games and couldn't get the hang of the controls. Spotty youths would have no problems.

We played a game called Dactyl Nightmare, in which we tried to shoot each other while a green dinosaur tried to kill us. It was weird, being locked into a three-dimensional world, seeing and hearing objects in front and behind, but I can't say I found it pleasurable. The helmet was annoying and the game boring. Dr Waldern seemed a bit miffed when I said this, but I said hold on, that's just me.

He then led me into the ultra-secret area, where they are working on much better images that will reproduce real faces, not just cartoon figures. The next generation of helmets (or visettes, as they call them) will weigh only 450g. In generation three, they will be no bigger than a pair of specs.

Jonathan Waldern was born in 1960 near Hampton Court and has two sisters. 'My older one is a banker and very good and my younger sister is an air hostess and very attractive.' Tut tut, Jon. He paused, looking at me, puzzled. I explained that one does not use such language these days. Still he looked puzzled. I suppose if you've been out of the daylight for so long, you've probably missed a lot of what we like to think is real life.

His father took the family to live in the United States and France, working as a manager for IBM. He was sent home to prep school and public school, Brighton College, then to Leicester Poly - now De Montfort University - to read design engineering.

He came up against an intriguing problem. Computers were brilliant for documenting things, but were no good for designing. Yet at the same time, there were enormous developments in 3D graphics. How could the two systems be put together? A bit like having a pen and paper, I suggested, but being unable to use them together? He nodded.

He graduated with a First from Leicester, then spent the next five years doing a PhD on 3D interactive graphics at Loughborough University. Several interesting things happened while he was there. One, he married Lindsey, whom he had met at Leicester when she was studying jewellery design. She was by then working and kept him for the last years of his PhD. They have three daughters - Freya, 5, Rebecca, 4, and Mia, 2.

I asked about his wife, meaning her background. 'My wife is far brighter than me,' he replied. But you've got a First and a PhD. 'I mean she's quicker than me; she understands people better, she's got a sparkling character. She's good at crosswords and Scrabble, which I'm not, and good at linguistics. I'm better mathematically.'

The other event at Loughborough was the arrival in 1984 of Tomorrow's World. Jonathan did not appear on it, but his prototype work station did - his first, home-made attempt at combining 3D graphics with a computer. It had won a little prize, sponsored by BT, which was how they'd heard about it.

The story might have ended here. Clever scientist does some original research, even knocks up a model, then disappears as a cog in someone else's mighty machine. Not Jon. Some entrepreneurial gene was lurking inside, egging him on.

'I set out for myself a 20-year plan: First, learn how to make a VR computer system; second, set up a company to produce the product; and third, take the technology and exploit it worldwide. I'm just leaving stage two.'

Stage one began in 1987, working from his garage at home. He had a day job with a computer firm, but in evenings and at weekends he was in his garage. He'd formed his own little company, at a cost of pounds 10,000, with a couple of friends. 'Raising that first pounds 5,500, which was my contribution, was agony. I had to borrow from my family.

'Patents cost me nearly pounds 3,000 - and that was cut-price. Local lawyers were so interested that they gave me discounts. In fact, everyone I approached could not have been more helpful. The Leicester accountancy firm I used helped produce a development plan without charging. Only when I got the finance did I have to pay their bill. It came to pounds 25,000, so you can see how hard they worked.'

He tried in vain for government grants but in the end an entertainment firm, Leading Leisure Plc, big in casinos and restaurants, put in pounds 600,000, for which they got 75 per cent of Jon's firm. He moved out of his garage and took premises underneath an old Leicester mill. There were four workers at first, which expanded to 18, and each day they went down below to work, hidden from the world, with no hint of their existence. 'We knew we were ahead of the field, but we had to keep it all secret. In the world of high technology, it's not what you've got, it's when you've got it.'

Trading began in 1991 and since then they have sold 390 of their virtual reality systems, costing up to pounds 32,000 each, most of them to the US and Japan. Last month, the firm went public, bringing in pounds 12.6m. Jon, now the managing director, sold a small part of his holding, which made him pounds 750,000. Have you spent it? 'It's mostly in a trust, to educate my daughters.' He retains 10.4 per cent, which at the moment is still worth around pounds 7m. 'I don't look at the share price. It is important, but the way to keep it up is to concentrate on working hard.'

Doesn't he feel that ending up with only 10 per cent is a bit titchy, considering what he's done? 'Not at all - 10 per cent of something is better than 100 per cent of nothing. Without the capital backing, I would be nowhere.'

He has always had three objectives - money, business, technology. In that order? 'God, yes. There is nothing better in a holistic sense than seeing the revenue increase. Building a business comes second, making partnerships and relationships. Technology is only 5 per cent of the story. Making a product is easy. Marketing and selling it is the hard bit.'

Did he feel he had special skills, to do what he'd done? 'I don't think of myself as having skills. I've always taken the common-sense approach - not to be intimidated by problems, but to see them as things to be solved, and never to be fazed by things going wrong.' But you've combined technical knowledge with business skills, that's most unusual. 'OK, perhaps I'm a good all-rounder.

'We're still ahead of the field. Our nearest rival has made and sold 25 units compared with our 390. But we have to keep aggressive, working 24 hours a day if necessary. My normal hours are 8.30am to 8pm, but I might stay on until three in the morning, and so will others, to complete an order.'

The company's commercial orders so far are wholly in the entertainment field - to amuse spotty youths in arcades. 'That's not quite fair,' he said. Yes, but aren't you saddened that all this technological genius, all this effort, is only being used for idle amusement? 'We had no alternative. The leisure industry could see its application. They put up the money, so that's what we've produced.

'But its uses in other fields are so obvious. Think of architecture, being able to walk around a three- dimensional plan, go inside, adding and changing, without leaving your desk. In medicine it will revolutionise brain surgery. Imagine a child in a road accident, the head smashed, so they have to rearrange bits of bone. With virtual reality, the surgeon can go inside the head. We can let him see the child's head growing, 20 years in the future, so he can know if the bone he's putting in will look correct later. At present, they're using 'keyhole surgery', cutting into the unseen and sometimes making terrible mistakes. We are supporting Milan University's brain surgeons, who use our systems.'

There is also, of course, the sexual application. Virtual reality could reproduce a world using three senses - sight, sound and touch. It is therefore pretty easy for anyone to believe they are in bed with Marilyn Monroe, and appear to experience the appropriate sensations. 'We have had firms in the pornography business inquiring about our systems, but we are in the family entertainment business. We've said no - though I suppose my shares might have doubled.'

But an invention can't be uninvented. If you don't do it, someone else will. 'That's fine. It's going to happen, but it won't be my fault. You can't blame Caxton for girlie mags.'

The company already has premises in the US, and next year will open in Japan, but Jon's aim is not to get too big; say around the size of Nintendo, with only 2,000 or so employees, making most of their money from rights and royalties. He is thrilled that some of the present big boys, such as IBM and Motorola, have invested in the company.

It's fairly easy to imagine Dr Jon 20 years ahead, his master plan completed, multi-billionaire, knighthood, controlling a world empire, at 40 or 50. He says he has no thought of retirement. 'The concept of leaving your life is alien to me.'

But will you be happy? How do you mean? he asked. You won't have lived, I said. You'll have worked round the clock, cut off from daylight, from books, theatre, films, probably from your daughters' lives. Will it be worth it?

'You can't achieve excellence in this life without hard graft. I agree the breadth of one's existence will be constrained by my work, but I am willing to trade that off against winning battles and achieving success. Every day we make progress. Every hour I am in a field where the possibilities are unlimited. It is an entrepreneur's dream - and we've hardly started. We will revolutionise not just entertainment, architecture, medicine, but fields that can not yet be imagined. What I am dealing in is sheer excitement.'

(Photograph omitted)