Sources of Funds

To investigate the funding issues, let’s imagine a typical project.  The situation we have in mind that you’ve established a local or regional project team and you’re clear on the scope of the project.  You have thoughts on what type of corporate structure you might use and you’re developing the business plan.  You’re mapping potential demand and working out where the customers are, talking to potential partners for the build and you are close to knowing what you’re going to build, where it’s going to go, what it’s going to cost and how services can be offered.  Now you need to raise the money.

The purpose of this article is to help you think through the options, and, hopefully, reduce the amount of time you might waste by approaching the wrong targets for the wrong amount of investments.  There’s an obvious disclaimer that we need to make in that INCA cannot offer investment or financial advice nor does anything on this site constitute such advice.  However, we hope that you can benefit form the experience and knowledge of our contributors.

Our working assumption (supported by evidence from some of our near neighbours in Europe and recent UK experience) is that local/regional NGA projects will require different approaches to funding than more ‘traditional’ telecommunications projects.  For example, many of the community inspired projects in the Netherlands and Sweden were regarded as ‘sub-scale’ and ‘un-economic’ by traditional investors and telecommunications companies; yet these projects delivered high levels of customer take-up and are delivering sustainable returns.

In looking to fund your project, you need to understand the territory and which types of funding might be available; so we define the following seven types of potential investors:

  • Private investors – individuals.  Sometimes known as “Angel investors” they invest in smaller projects at an earlier stage than venture funds and generally work very closely with those they invest in.  Often they are what’s called "high net worth individuals" – people who’ve made money elsewhere and now want to invest it in other areas.  The use of Self Investment Pension Plans and the Enterprise Investment Scheme may be attractive to them.
  • Alternative or community-based forms of investment.  These include cooperative structures such as Industrial and Provident Societies, Community Investment Companies; new forms such as ‘Social Impact Bonds’ and ‘Community Bonds’ are emerging.
  • Private investors – venture funds, venture capitalists.  Generally invest in the equity of established businesses.
  • Corporate investors; companies generally in the telecommunications field that put their own investments into projects.
  • Public investors and government organisations at regional/national level.  We include BDUK in this category, and formerly, the Regional Development Agencies were active in some areas.  Often, their investments are conditional on investments by others – this is called "matched funding".  The picture as far as BDUK is concerned is still developing.  Other initiatives such as Local Enterprise Partnerships, Regional Growth Funds and the Enterprise Zones (announced in the Budget in March 2011) will also have a bearing on your funding strategy.  The picture is changing rapidly.
  • Infrastructure investors (sometimes called “Specialist Investment Funds”) invest in long term ‘utility’ investments such as roads, railways, energy.  In this category, we include the European Investment Bank (“EIB”).
  • Investment institutions (conventional); investors and pension fund managers and banks (both UK and overseas).


We’ve ranked the above broadly in terms of the size of projects that they might be interested in funding – ie as you look down the list the projects of interest tend to get bigger.  That’s not an exact relationship however.

As you can see, from a conventional investment point of view, the main problem facing local and regional projects looking for funding (assuming a sustainable business case can be defined) is that of scale.

It also should be noted that the formation of NGA projects would be regarded by many investors as “early stage” developments or “start-ups”; and these are regarded as high risk by venture or development capital investors.

At the time of writing, it appears unlikely that conventional large-scale investors (the final two categories in the list above) would be prepared to invest in local or regional NGA projects.  There may be some possibility that "framework" agreements, which can aggregate a number of projects into a total size of interest to larger investors, might be possible; INCA is actively working on this idea.

It’s certainly the case that the UK will need to find innovative approaches and structures to addressing the need for investment.