Investment Opportunity

Broadband is a strong investment class: long-term asset with hard collateral, utility-like cashflow with predictable demand, and asymmetric/uncorrelated risk providing a partial inflation hedge. Average monthly household broadband consumption continues to grow at a 38% CAGR, projecting to reach 1 TB by 2028 (from 587 GB in 2023. Households also prioritize internet service, with 42% willing to reduce other household expenses to afford their monthly subscription.

We believe COMMUNITYCENTRIC broadband is an even stronger investment class. Inclusive network design, thoughtful community engagement, and localized business models enable internet services that more effectively target low-income communities. Whereas typical network deployments default to a 2030% take-rate assumption and lean on higher monthly prices to make economics work, we see community-centric broadband invert the dynamic: achieving profitability through take-rates of 6080% with affordable monthly prices. Thatʼs the model needed to bridge the digital divide for historically underserved communities.

Community-centric broadband historically outperforms incumbents. This is not an argument of impact over returns; community-centric broadband delivers impact AND returns. For the last four years, the top 10 internet service providers (ISPs) have NOT been brand-name incumbents with one exception: Verizon was 7th and 10th in 2019 and 2020, respectively. Community-centric ISPs continue to outperform when ranked by best network speeds and service quality. The average upload/download speeds for major incumbent ISPs were 57% slower than those of the community-centric ISPs that made up the top 10.

Through speaking with almost 200 ISPs, we found that (a) all are small- and medium-sized businesses, (b) most were founded by someone from the community to serve the community, and (c) all lacked access to capital. Access to capital, particularly structured credit that provides non-dilutive, flexible capital that understands broadband project economics, high quality network design and deployment, and best practices in customer and community engagement.

Investment Strategy

The US is home to 3,000 registered ISPs, over 60% of whom serve less than 500 census blocks and 25% serve less than 70 blocks (aka hyper local). The current capital sources for community-centric ISPs are federal/state grants (often with requirements favoring incumbents), municipal capital markets (inaccessible for low-income communities), private equity (not incentivized to serve low-income), and local/commercial banks (onerous collateral/guarantee requirements). But the underlying nature of broadband demonstrates attractive credit attributes:

Long-term asset with hard collateral (i.e., 3050 year lives for fiber)
Predictable demand with low volatility (i.e., increasing bandwidth consumption)
Asymmetric, uncorrelated risk with inflation hedge (i.e., utility-like, inelasticity)

Small- and medium-sized ISPs need structured credit solutions that understand the economics and realities of broadband, with thought partnership on network deployments and expansion. There are insufficient capital providers with this profile. And this is the niche where Connect Humanity operates. We provide structured loans and revenue-based financing products from our experiences rooted in operating ISPs and investing in infrastructure. Our approach intersects the rigor of private equity/private credit in underwriting WITH community and stakeholder engagement for impact and optimal take-rate WITH post-investment portfolio engagement to problem solve construction and operational barriers.

Connect Humanity's multidisciplinary investing converges to protect both financial returns (less project risk) and the marginalized communities the network is intended to serve. In many of our investments, where the market created digital redlining, we see unserved, potential subscribers with the opportunity to build deep-rooted, long-term trust with the community. We have been recognized by ImpactAssets 50 as an Emerging Impact Manager.

Track Record and Opportunity

Through a $4M proof-of-concept fund, Connect Humanity has tested this investment strategy across a portfolio of five investments. This portfolio contains a mix of term loans and revenue-based financing collectively tracking a 12% gross IRR. Breaking down portfolio IRR, term loans are yielding 9% while RBFs 22%. While some investments are higher performing than others, our aggregate portfolio demonstrates the value of a blended finance approach.

We seek to scale our impact with the raising of a $50M private credit impact fund to expand broadband in rural and low-income communities. With $20M pre-diligenced and a $120M pipeline, we aim to deploy fully in 2 years, targeting a 15-17% net IRR.

Community Broadband Fund

Community Broadband Fund