Twelve months ago, Daragh Scaife was on top of the world. The 38-year-old from Dublin drove a BMW, stayed at the finest hotels and attended prestigious business conferences. Oniva, the Web design company he co-founded in 1993, was expanding rapidly across Europe and Asia. With a stock-market flotation just months away, Scaife looked set to become the latest Irish-based dotcom millionaire. Then came the crash.

Last autumn NASDAQ, the stock market that generated much of the cash to fuel the technology boom, went into steep decline after an initial slump in April. Investors quickly lost confidence in the new economy, and within six months Oniva had closed its doors.

Almost 100 staff were laid off at the Dublin-based firm, and for the first time in decades, Scaife was out of work. "It happened very fast," he says. "The BMW got repossessed and, from a purely personal perspective, I was left with nothing . . . No job, money, salary - nothing. There was no secret bank account."

The closure put pressure on his business and personal relationships, and it's only in the past four to six weeks that he has recovered from a bout of depression, he says.

Scaife is one of dozens of young Irish entrepreneurs who saw their dreams of joining the millionaire elite vanish almost overnight, as the dotcom bubble burst and Internet firms folded.

Rory and Charlie Ardagh, the twentysomething sons of the Fianna Fβil TD Seβn Ardagh, became paper millionaires for about a year when they sold European Access Providers, their start-up wireless-communications company, to Formus Communications, a US company. But their luck didn't last long. In March, Formus collapsed and the brothers' shares in it became worthless.

The Internet boom of the late 1990s marks one of the greatest excesses in economic history. Venture capitalists pumped billions of dollars into firms run by 20-year-old whizz-kids with little or no business experience, senior executives dumped old-economy jobs to join start-ups that offered share options rather than standard salaries and some economists and parts of the media predicted the boom would never end.

The madness is illustrated in Startup.com, which was showing last week at the Irish Film Centre, in Dublin. The docusoap-style film follows the progress of two young Internet entrepreneurs who prise $50 million from venture capitalists with some smart talking and a business plan cobbled together over beers with a few friends.

"Two years ago, it didn't matter if you were nine or 99: If you had a dotcom idea, there was finance available," says Barry Dixon, a technology analyst with Davy Stockbrokers. "Eighteen-year-olds were getting money which they would never have got in the past . . . People thought the Internet was all things to all people and the uses and applications of the technology would be massive."

It was fatal to believe our own hype, agrees Gerry McGovern, a founder of Nua, one of the Republic's best-known Internet firms, and the author of The Caring Economy, an ironically titled book on the new economy.

"There was always a mad drive within the Internet industry that if you weren't expanding or growing, then you may as well be dead," he says. "Because of the frantic nature of the industry, there was never a moment when it looked solid or secure . . . we knew it was abnormal."

Nua went into liquidation in March, despite being rated as one of the world's top 10 Internet strategy firms by Fortune magazine.

Like most Internet companies, Nua did not make profits, but it did spend lavishly on an overseas office in New York. When the downturn came, investors refused to bail out the company, and some staff were not paid their final salaries.

The pressures of managing a failing business took their toll on McGovern, as they had on Scaife at Oniva. He describes the gradual descent into liquidation as progressing through layers of hell. "Every time you thought it couldn't get much worse, it would. It was a feeling like being a chess piece and gradually, over a game, being pushed into the corner."

McGovern, who has a wife and two children, says the closure caused financial and emotional strain. "It's hard to know exactly what depression is, but it looked extremely bleak for a certain period of time," he says.

The decline in the Internet sector and the swathe of company closures could become a huge psychological blow to entrepreneurs, he believes.

"In the 1990s, Ireland developed a sense of hope and belief that you could do something on your own and be prepared to do ambitious things. You've got to be prepared to fail at least eight out of 10 times," he says.

But there are signs that the Republic's band of technology entrepreneurs are willing to have another go.

The Ardagh brothers will launch a telecoms company shortly, and another twentysomething, Barry O'Neill, the former chief executive of Rondomondo, Eircom's failed digital-media subsidiary, is gearing up to launch a firm before Christmas.

"I've learned a huge amount from launching and closing Rondomondo. All you can do is take this knowledge and apply it," he says.

Despite the difficulties Daragh Scaife experienced with the collapse of Oniva, he is also jumping back on the Internet bandwagon.

"About four to six weeks ago, I started getting fired up again," he says. "It's like the pioneering spirit in the US: if you don't succeed at first, what are the choices but to get up and try again?"

Scaife believes the structure of his new company should be different from that of Oniva. Responsibility will be spread more equally among many staff and management, and making money will not be the sole goal of the firm.

"What fundamentally caused the stock market crash was greed.Greed has a way of fostering a collective blind spot to the realities of work, people, customers and, ironically, enough money. If we really want to learn from this experience, we must fundamentally question the model of shareholder return, whatever the price," he says.

Scaife has called his new firm Rakata, which he says is the name of an island formed by the violent volcanic eruption of Krakatoa. "This island created its own ecosystem," he says. "I want to do this with the new company."

Daragh Scaife, Gerry McGovern and Barry O'Neill are speaking today at "Online Survival Lessons Past, Present and Future - Creating A Road To Recovery For The Irish Technology And Online Sector", a seminar at the Conrad Hotel in Dublin. Tickets, which cost £75, must be booked online, at www.webintellect.ie