A British student who developed a video streaming website in his bedroom has sold his business to US firm Handheld Entertainment for $1.25m (£630,000).

Kieran O'Neill, who studies at Bath University, set up his pioneering website HolyLemon.com while taking his GCSEs in 2003, two years before YouTube was launched.

The website started off as a way for Mr O'Neill to show friends the Flash animations he created.

But as word of the site began to spread, Mr O'Neill started streaming user-generated funny video clips submitted to the site.

Realising its potential as a profitable business, the 19-year-old began marketing the site and drawing revenue from advertising sales.

HolyLemon.com went on to attract 50,000 users per day and became established as Google's first-ranked website for the search term "funny videos".

Kieran O'Neill: "The website started off as a way of showing Flash animations I made to my friends and just grew from there."

In March 2007, the site had more than 1.1 million unique visitors - 32 per cent of whom were based inside Europe.

Over the last year, Mr O'Neill has refused several offers for the business, including an approach from Brad Greenspan, one of the early investors in MySpace, and other US companies keen to expand into the European market.

After spending three weeks at the company headquarters in San Francisco, Mr O'Neill accepted an offer from Handheld Entertainment who impressed him with their vision for the company.

Mr O'Neill, of Winchester, Hampshire, now holds shares in the parent company and has a sizeable amount to invest in the two ventures he is currently working on.

The business administration student said: "With exams, I haven't really had time to celebrate yet.

"The website started off as a way of showing Flash animations I made to my friends and just grew from there.

"I designed the early sites in my bedroom at home and the trick was learning how to effectively stream user-generated video clips through the browser.

"It is what you see everywhere now, but then it was a really novel idea - particularly for humour websites."