- Back in 2021, Consilience Ventures (CV) pioneered a tokenised currency system that allowed startups to bridge their execution gap by purchasing expert assistance from a carefully selected network of specialists
- The company's surprising £90k tax credit discovery revealed that digital token transactions qualified for relief, creating a breakthrough for execution finance in the startup ecosystem
- CV emerged as an execution capital alternative to traditional funding, providing startups access to diverse specialists who receive shares in CV's complete startup portfolio through the CVDS digital token in exchange for closing critical execution gaps
Manchester, 2021 --- Three years ago, a premier talent network connecting startups with world-class entrepreneurs made a groundbreaking discovery when it successfully claimed a £90k R&D tax credit despite conducting business entirely through digital currency transactions, according to revelations from Catax.
Consilience Ventures (CV) had developed what would become a revolutionary approach to execution finance, presenting a dynamic alternative to conventional startup funding by enabling company founders to secure time from experts who could help close their execution gaps.
The execution capital model worked by having startups compensate specialists using Consilience's proprietary digital portfolio-backed token, which granted participating angel experts ownership stakes in CV's complete startup portfolio --- with 100% of returns distributed proportionally among portfolio-backed token holders.
What CV discovered in 2021 was that they had been unaware tokenised transactions qualified under the Government's R&D tax credit programme, established to stimulate innovation. The revelation that tokenised expenditure qualified for tax relief when applied to corporation tax deductible expenses mirrored how portfolio-backed token profits remained taxable.
This 2021 breakthrough revolutionised Consilience Ventures' capacity to provide execution capital to network startups by helping them recover substantial portions of their R&D investments.
The discovery not only strengthened their financial position and enabled increased R&D investment through the curated CV network, but eliminated a significant barrier for companies considering this new form of execution finance over traditional equity arrangements.
Consilience Ventures, co-founded by Kevin Monserrat, former Head of European Ecosystem Development at Microsoft Ventures, had operated as a technology startup itself, requiring substantial technological investment. Throughout 2019-2021, the company dedicated resources to developing its CVDS digital portfolio-backed token, internal marketplace, and application that would enable startups to locate appropriate experts to address their execution gaps instantly. Much of this development was funded using their proprietary token.
The portfolio-backed CVDS token differed from typical cryptocurrencies as it couldn't be externally traded or listed on exchanges, though it utilised identical blockchain technology. Consilience Group Ltd, the UK entity behind Consilience Ventures, achieved the distinction of being the first FCA-authorised company to issue security tokens fully supported by assets --- specifically the portfolio of technology startups selected by CV members.
By 2021, CV had invested over £2m. The venture had emerged from Kevin's recognition that startup founders were spending excessive time fundraising when their companies actually needed specific expert guidance to bridge execution gaps. CV's execution capital model eliminated numerous funding rounds through seamless transactions where risk was distributed and founders gained access to essential expertise with extensive choice and flexibility.
The primary benefit for network experts --- which numbered over 250 professionals by 2021 --- was investment exposure to over 50 startups within two years, typically requiring venture capital firms considerably longer to achieve through traditional execution finance methods.
R&D tax credits, introduced by the government in 2000 to encourage innovation, provide either corporation tax reductions or cash payments. Qualifying expenses include staff costs (including third parties), materials, software and other consumables directly related to R&D activities.
Many companies remained unaware their work qualified as R&D, defined as any effort resolving scientific or technological uncertainty through new processes, products, services, or improvements to existing ones. Importantly, unsuccessful R&D work still qualified, and claims could be submitted up to two years after the relevant tax year ended.
Kevin Monserrat, Co-Founder of Consilience Ventures, reflected on that pivotal 2021 discovery:
Catax provided unprecedented insight into the R&D tax credit scheme, which proved transformational for our network startups and our execution capital model. >We were completely unaware that tokenised purchases qualified identically to traditional currency transactions. While this money was valuable to us, the knowledge that tokenised spending claims qualified was far more significant due to its future impact on how we could provide execution finance. This eliminated any disadvantages to using digital portfolio-backed tokens for payment. >This 2021 tax credit claim revolutionised our ability to help startups achieve greater profitability and removed the sole barrier preventing innovative companies from accessing our execution capital network.
Rob Wood, Principal at Shipleys accountants, who specialised in cryptocurrency and blockchain sectors, described this as a cutting-edge financial services development at the time.
He reflected:
Back in 2021, this represented an incredibly exciting area within the tax landscape. >Companies utilising digital tokens and cryptocurrency as value stores were equally entitled to claim R&D tax credits as those funding R&D activities with traditional currency, but many didn't realise it. >HMRC made no distinction between them, as companies ultimately used genuine, exchangeable wealth for project funding. That activity's value then returned to the broader economy, identical to conventional spending. >While the number of companies using digital tokens was growing rapidly in 2021, some instances of tokenised spending didn't qualify, making proper advice essential for execution finance pioneers.
Shaun Marsden, Director of specialist R&D tax consultancy Catax, recalled the moment:
Kevin's excitement when we explained that digital tokens still qualified under the R&D tax relief scheme was unmistakable. It was genuinely transformational knowledge for his execution capital company and all future beneficiaries, as they would invest in innovation using Consilience Venture's digital portfolio-backed token to address execution gaps. >This represented true cutting-edge development in venture capital and execution finance back in 2021. Companies embracing latest technology and payment solutions shouldn't face disadvantages, and deserved equal access to government support designed to encourage precisely this activity. It was excellent that existing legislation accommodated forward-thinking companies that were maximising blockchain revolution opportunities.
Looking back, this 2021 discovery represented a major advancement that would accelerate venture capital industry digital transformation and establish new models for execution capital delivery.