Community broadband scheme - 5% annual return over 3 years

Albermarle

geoffers4 said:

Just to be clear - I do have a personal interest in seeing this organisation continue to grow. I'm 1 village away from getting connected and looking at what they've delivered so far as a community effort - over 7500 properties enjoying broadband speeds typically measured around 450MB - it could be a worthwhile cause to support.
Noting the risks around future returns and withdrawal of funds after 3 years... I wonder how I could assess the financial viability of the business model they are operating? It's a not-for-profit, with continuing growth, charging each customer £30 per month for a service not available from BT or anyone else in this area (currently). 

As already mentioned they raised £3million on the Triodos crowdfunding site about 18 months ? ago.
There was a very professional detailed prospectus written with the aid of Triodos bank which showed the viability of the project and its ability to pay back the bonds/loan. Of course there is a risk , but it is definitely not a scam and can not be compared to airport car park schemes and the like. 
My question would be why they need another alternative fund raising scheme so soon after raising the £3million.
Let others take the risk. Most stock markets can achieve a real return of 4%-6%.
Or you could see it as another ( small ) way of diversifying your portfolio and not be too over dependent on global share returns .

kinger101

geoffers4 said:

Just to be clear - I do have a personal interest in seeing this organisation continue to grow. I'm 1 village away from getting connected and looking at what they've delivered so far as a community effort - over 7500 properties enjoying broadband speeds typically measured around 450MB - it could be a worthwhile cause to support.

If you were minded to invest, waiting until you can be connected might be better.  With a £1500 investment, they'll waive the £150 connection fee.

steampowered

The average return generated by the major stock markets, whether you look at the past 10 years or the past 50 years, is 7-8% per year.

Since good returns are available from normal investments, I see no need to investigate schemes like this.

If you are tempted for personal reasons I would look very carefully before investing - there could be a risk that your investment will go to £0.

Albermarle

Since good returns are available from normal investments, I see no need to investigate schemes like this.

How about helping local social enterprises with a small portion of your investable money ? seems a good enough reason to me .

steampowered

Albermarle said:

How about helping local social enterprises with a small portion of your investable money ? seems a good enough reason to me 

This sounds like a good reason to me, provided that the investment only comprises an appropriate portion of one's overall portfolio and the risk of losing the investment is understood.

csgohan4

Sounds like a ponzi scheme

bowlhead99

Albermarle said:

Since good returns are available from normal investments, I see no need to investigate schemes like this.

How about helping local social enterprises with a small portion of your investable money ? seems a good enough reason to me .

There's an argument to suggest that if you invested that small proportion of your investible money into a proper commercial venture designed to make money (rather than a non-profit that isn't designed to make any more money than it hopefully costs to return the shareholders' capital), you would then have more investible money, and then you could help the next similar venture that comes along, as well as some other venture too, as a charity-minded contribution.

Still, that sort of thinking doesn't really provide any immediate help to community investment programs such as this, which find it difficult to raise proper funding from commercial sources.

Banks and proper commercial investors would expect to either invest in secured or unsecured debt (with a fixed income and the ability to sue in case of default), or in equity (with beneficial ownership of a share of assets and profits which includes upside if the business is more successful than expected), or some mezzanine level in between the floor of debt and the ceiling of equity returns.

Whereas, this type of arrangement which has no debt agreement with the investor and no equity upside either (because the idea is not to make any profits) is the worst of all worlds for someone who is looking to take a risk to make more money than they make on a bank deposit account.  The reason to invest is to help the community do what it wants to do (install better connectivity or whatever), which is a necessarily non-financial motive for the investor.

As such, whether the stated target return is 2%, 4% or 10% is pretty arbitrary. 2% is not anywhere near enough of a financial motivation because it's not much more than a term deposit with significant risk of never getting it back. While 10% would be expensive for the operators of the enterprise, and meanwhile sounding 'too good to be true' for any safe investors - meaning community members would worry that it is indicative of a really big risk of never being able to pay out, which could put them off getting involved. So, they have picked a somewhat arbitrary number between those extremes.

But the practical advice can only to be to invest if you're doing it charitably to help the project in its goals (which might include some personal benefit if it improves your chances of a better broadband connection) rather than for a personal financial return. All that can be said about the return is that it can be expected to be between a maximum of +4% a year and minimum of -100% per year.

Murphy_The_Cat

geoffers4 said:

Just to be clear - I do have a personal interest in seeing this organisation continue to grow. I'm 1 village away from getting connected and looking at what they've delivered so far as a community effort - over 7500 properties enjoying broadband speeds typically measured around 450MB - it could be a worthwhile cause to support.
Noting the risks around future returns and withdrawal of funds after 3 years... I wonder how I could assess the financial viability of the business model they are operating? It's a not-for-profit, with continuing growth, charging each customer £30 per month for a service not available from BT or anyone else in this area (currently). 

As a VERY satisfied B4RN customer you'll absolutely love the broadband connection when you get it (my connection is 1Gb).

Looking at their current and planned network coverage, there are now a couple of "pinpricks" away from home turf - it would be lovely to see other rural areas that getting the benefit of reliable hyperfast broadband.

p.s. spotted the B4RN fibre laying equipment down your way yesterday

Albermarle

But the practical advice can only to be to invest if you're doing it charitably to help the project in its goals (which might include some personal benefit if it improves your chances of a better broadband connection) rather than for a personal financial return. All that can be said about the return is that it can be expected to be between a maximum of +4% a year and minimum of -100% per year.

It is a good summary and of course there are many other similar projects looking for money . Some do offer shares , some are bonds , usually paying around 4 % ( or -100% maybe ) and despite some comments above they are not normally scams or Ponzi schemes . For example Ethical Crowdfunding Investments | Triodos Bank (triodoscrowdfunding.co.uk)

Gadfium

B4RN is a well run scheme and has done very good work over the last few years. At some point in the not too distant future their target market will shrink considerably though. They are limited geographically and at some point will not be able to grow further. Secondly, they will come under competitive pressure from the new satellite competitors. The Starlink trial is going very well in America with download speeds as high as 120 Mbps. That network is growing very fast and it will be available to more and more people as the orbital shells fill up.

The UK government has also thrown half-a-billion taxpayer pounds into the bankrupt One Web system. They bought it thinking that they could build an alternative to the Galileo GPS system, but now they've realised that the sats are the wrong type and in the wrong orbits it looks like they'll be offering satellite broadband. Personally, I think that it will (figuratively) crash-and-burn.

At some point Blue Origin (the Bezos company) will also launch their Kuiper constellation, also providing satellite broadband.

These companies will be eating into rural broadband schemes such as B4RN.