How to Generate and Validate a Business Idea Suitable for the Innovator Founder Visa

05-April-2023 22:19
in Idea Viability and Development
by Admin

Interested in the new Innovator Founder Visa but do not yet have a business idea that is innovative, viable, and scalable? 

From 13 April 2023 onwards, the start-up and innovator visas introduced in March 2019 will effectively merge into one scheme, dubbed the Innovator Founder route.  At the same time, the Home Office has announced a major overhaul of the endorsing body system that was introduced with the start-up and innovator visas. 

The endorsement process was and still will be a critical part of the visa application process. Endorsement is required to prove that the business idea is innovative, scalable, and has the potential to contribute to the UK economy. Endorsing bodies are responsible for assessing the business idea, the founding team, and the potential for success.  Those applicants that meet the visa criteria are awarded an endorsement letter which can then be used to apply for the visa.  

Changes to the Process of Obtaining an Endorsement from an Endorsing Body

Under the old system, founders looking to apply for start-up and innovator visas had to get a letter of endorsement from one of more than 50 private UK endorsing bodies, or one of a few dozen UK universities. However, Home Office officials have seen over the course of the last four years that this system did not work well either for the founders or for the Home Office.  Consequently, the Home Office announced that they would be making changes.  A Home Office spokesperson said, shortly after the Innovator Founder visa route was announced on 9 March 2023: 

We are introducing reformed endorsing body arrangements to support the operation of the route, which will deliver a simpler, easier-to-use system for applicants”.   

The Home Office has decided to reduce the number of endorsing bodies from more than fifty to just three: 

  1. Geminus Innovation (t/a Innovator International)
  2. Envestors,
  3. The newly established UK Endorsement Services.

The fact that there were so many different endorsing bodies made it incredibly difficult for the Home Office to maintain a uniform interpretation of the criteria for a project to qualify for the start-up or innovator visa (i.e. innovative, viable, and scalable). This disparity between the Home Office's interpretation of the criteria and the interpretation of many of the endorsing bodies culminated in an explosion of refusals in 2022 for applicants that had been endorsed by one of the endorsing bodies but who were subsequently refused by the Home Office at the visa stage. The refusal rate for the innovator visa, for example, increased from 5% in Q2 of 2021 to 44% in Q2 of 2022.

With only three authorised endorsing bodies able to consider endorsement applications for the Innovator Founder visa, it will be much easier for the Home Office to maintain common standards and a single interpretation of what constitutes an innovative, viable, and scalable business.  The Home Office will work closely with these endorsing bodies to ensure that each one deeply understands what the Home Office is looking for from Innovator Founder visa applicants.  They will ensure that the endorsing bodies apply the criteria for endorsement uniformly regardless of which of the three endorsing bodies receives an application.  It will no longer be possible, as was previously the case, to "shop around" the various endorsing bodies to find someone that was willing to support a business idea after having been rejected as not meeting the visa criteria by a different endorsing body. 

Endorsing Body Definitions of "Innovative, Viable, and Scalable" 

Applicants still must have a business idea that has been assessed by one of the three newly approved endorsing bodies as being innovative, viable, and scalable. The three newly authorised endorsing bodies mentioned above will be looking for the following from business projects used as the basis of an Innovator Founder visa application:   

  • Innovation — The project must either be unique in the UK market or sufficiently different from the industry incumbents for the business to enjoy a significant competitive advantage over its competitors.  The innovation must be related to the core function of the business - it cannot be a "bolt-on" innovation that has only been added to a traditional business for the purposes of meeting the innovation requirement (e.g. a traditional business that offers an app of some description to customers).  Endorsing bodies are especially wary of projects where a few innovative buzzwords (e.g. AI, machine learning, Web 3, and blockchain) are added to an otherwise unremarkable business idea.  Unless the innovative technology is central to the project, it is unlikely to be endorsed.  There must also be a credible development plan for the technology/innovation if the applicant is a non-technical founder.    
  • Viability — There must be strong evidence that this innovation is not just "innovation for innovation's sake" but that it is a solution to a genuine pain point that is widely acknowledged by potential customers.  Endorsing bodies have a strong preference for primary research over secondary desk research in establishing the demand for this innovation.  They are ideally looking for evidence of conversations with potential customers who have expressed a willingness to pay to solve a problem that they acknowledge exists and that they would like to address.  They will also assess whether or not the applicant has, or is actively developing, the necessary skills, knowledge, experience, and market awareness to successfully run the business.  The founder must also demonstrate to the satisfaction of the endorsing bodies that they have the financial resources available to launch and develop the business to the point where it is cash flow positive.     
  • Scalability — Endorsing bodies will assess the strength of the "go to market" strategy, with a special emphasis on the detailed plan for the business to secure its first ten to twenty customers. Given that the initial customer acquisition work is likely to be carried out by the founder(s) themselves, they will also assess the founder's experience, existing contacts to whom they could sell, and their general sales and marketing skills.  Endorsing bodies will also assess for evidence of structured planning and of potential for job creation and growth into national markets. 

Even a cursory reading of the expanded meaning of the visa criteria for Innovator Founder should tell potential applicants that the endorsing bodies are looking for exceptional business ideas from highly qualified entrepreneurs who are able to clearly demonstrate the appetite in the market for an offering like theirs.  Just having what sounds like an innovative business idea will not be enough - the Home Office and endorsing bodies alike assume that Innovator Founder visa applicants would never move with their family to the other side of the world to pursue a business idea that had not at least been subject to some basic tests.

Endorsing bodies are unlikely to take an applicant seriously who cannot demonstrate that they have spent at least some time actively validating their business idea.  Applicants hoping just to buy an innovative business plan "off the shelf" and then secure endorsement will be disappointed - under the new endorsement system it will be impossible to secure an endorsement without putting in any time and effort to demonstrate both their commitment to their chosen project and at least some level of "product-market fit". 

How Continuous Business Planning Helps Clients With Generating and Validating a Business Idea

Generating and validating a business idea that is suitable for the Innovator Founder visa scheme can seem like a tall order for foreign entrepreneurs.  It is hard to come up with an innovative business idea that is different from other comparable offerings in the UK without any insider knowledge of the UK market and equally difficult to conduct primary market research into a new business idea from the other side of the world.  Here at Continuous Business Planning, we have worked with foreign entrepreneurs that are looking to launch a new business in the UK for over a decade and have helped literally dozens of clients from every part of the world develop and test their ideas.  We help clients maximise the chances that their attempts to secure an endorsement for their Visa are successful in the following two ways:

  1. We Co-Create a Business Idea with the Client that Meets the Innovator Founder Visa Criteria
  2. We Help Clients to Validate Demand for their Innovative, Viable, and Scalable Business Idea  

We will go into more detail below about why each of these steps is important for anyone considering the Innovator Founder visa route and provide an overview of our approach to both of these two steps when helping support clients through this process.

Generating A Business Idea That Meets the Innovator Founder Visa Criteria

First, let it be said that we regularly have clients come to us with excellent business ideas that either meet the visa criteria straight away or could meet the visa criteria with a few small tweaks. We would start in these instances by assessing in detail the client's business idea to ensure that it meets all three of the endorsement criteria and is thus likely to be warmly received by an endorsing body. If necessary, we will work with the applicant to refine their ideas until they have a business idea that that the applicant is excited to pursue that meets the visa criteria. 

However, more often than not, clients come to us with only a vague idea of what they want to do - they are typically still very early in the process of generating the right business idea for them and need some help navigating the business idea generation process. Some clients and/or referral partners ask us to simply come up with an idea that fits the client's background and interests that is likely to be endorsed by one of the endorsing bodies. It is important to note here that we cannot and do not simply hand "endorsement-worthy" business ideas to clients from a collection of ideas that we have sitting on a shelf.  In these instances when a client has not yet hit upon a business idea that meets the visa criteria, our role would be to help the client find their "big idea" using business and creative frameworks that will help them to identify interesting concepts and create new business ideas.

While we are happy to present some ideas as inspiration on the types of businesses that a client could consider starting, we believe it is a terrible idea for clients to accept a random idea just because we (or anyone) told them it’s a good idea. In a study by CB Insights covered on Forbes, a whopping 22% of failed startup founders cite their primary reason for failure as either never having a true interest in what they were building or losing focus on the goal they set out to achieve. 

The best business ideas will most likely come from a client's strongest areas of interest.  If you’re not sure what your interests are, or which of them may potentially lead to a profitable business opportunity, start by asking yourself these questions:

  1. What are some topics you could enjoy writing a 1,000-word article about?
  2. What is the most meaningful part of your working day?
  3. What do you love doing?
  4. What is a professional achievement that made you feel particularly proud of yourself?

To gauge interest in a topic, I use a personal litmus test: Can I write a 1,000-word article on it and enjoy the process? This indicates my genuine interest and confidence in my knowledge, making me comfortable sharing it publicly.  However, it is not enough to simply look for areas of interest.  The very best business ideas sit at the intersection of strong interests, professional skills, and personal networks.    

Starting a new business is incredibly intense and requires complete focus for an extended period of time so it is critical for the visa applicant to pursue an idea that really captures their attention rather than just do whatever they believe will give them the best chance of securing the visa despite not being a project which interests them very much.  

Once you have identified your strongest areas of interest, relevant skills, and helpful members of your personal networks, there are three other steps through which we take clients when identifying a good business opportunity. The three steps are:

  1. Find an Unmet Market Need.
  2. Create a differentiated solution that meets customers’ needs.
  3. Perform High-Level Due Diligence to Sense Check the Solution

Finding an Unmet Market Need

At the heart of all business opportunities are customers. In order to win customers in a competitive industry environment, the product or service offered by your business must provide better value to them than existing solutions. Thus, the first step in finding a business opportunity is to identify something that customers want that’s not readily available to them. 

When searching for unmet market needs, the first place to look would be your work environment and personal life.

  • Work Environment - Your employer's customer complaints may reveal unfulfilled needs.  In many cases, if customers aren’t satisfied, the solution they want isn’t readily available elsewhere, or they’d just go to another vendor. If you can find a solution that solves the customers’ problem, then you may well be on to an interesting business opportunity. 
  • Personal Life - Similarly, personal frustrations and those of friends and family can point to business opportunities.  I see potential business opportunities every time I need or want something that I can’t readily obtain at what I view as a fair price. I also listen carefully when my friends and family express their frustration over not being able to find a solution to issues they’re dealing with or their dissatisfaction with something they bought 

Of course, it is important to bear in mind that business ideas based upon dissatisfaction with what already exists are likely to attract the attention and resources of industry incumbents.  Innovations that do things that have never been done before create new markets and so are necessarily aimed at people not currently in that market  Consequently, these innovative businesses tend to be shielded in the short to medium term from the competition as, initially, the market is often too small to tempt incumbents. 

Create a Differentiated Solution that Meets Customers’ Needs

The project must either be unique in the UK market or sufficiently different from the industry incumbents for the business to enjoy a significant competitive advantage over its competitors. The innovation must be related to the core function of the business - it cannot be a "bolt-on" innovation that has only been added to a traditional business for the purposes of meeting the innovation requirement (e.g. a traditional business that offers an app of some description to customers). Endorsing bodies are especially wary of projects where a few innovative buzzwords (e.g. AI, machine learning, Web 3, and blockchain) are added to an otherwise unremarkable business idea. Unless the innovative technology is central to the project, it is unlikely to be endorsed. There must also be a credible development plan for the technology/innovation if the applicant is a non-technical founder.

We help clients to take their idea and co-create with them points of differentiation and competitive advantage that will make their business truly unique.

Perform High-Level Due Diligence to Sense Check the Solution

We do not move forward to the customer validation stage of the process until we are sure that the client is not starting with a solution that is looking for a problem, but is instead starting with a genuine unmet market need (e.g., the infamous “build it and they will come” approach).  We have a detailed list of questions to ask which we briefly outline in this article in our blog to make sure that the client has critically analysed the market, industry, and team elements relative to the opportunity, ensuring each is sufficiently attractive and that sustained competitive advantage is possible.  

We will not move forward to the next phase until we have identified a business idea that is both likely to be endorsed and is a project to which the applicant feels truly committed to pursuing in the UK for at least the next 3 years.

Validating Demand for an Innovative, Viable, and Scalable Business Idea 

Over the last decade of working with entrepreneurs from the UK and all around the world, we have developed a process via which an applicant can validate their business ideas without significant costs. Our idea validation process is designed to give both the applicant and the endorsing body reasonable certainty that this business will have a sustainable, growing, paying audience in a matter of weeks, rather than wasting months or years building a final product nobody will pay for.  The process is designed to highlight who the first paying customers are likely to be and to lay a solid foundation for growth in the first 6-12 months of the business.

Our process for validating a business idea can be boiled down to 7 simple steps:

  1. Create an Early Feedback Group
  2. Have One on One Conversations With the Target Market
  3. Revise Idea Based On Initial Conversations to Ensure a Strong Competitive Advantage
  4. Develop an E-Mail List of Potential Customers
  5. Create Proof of Concept Goals
  6. Create and Launch a Pre-Order Offer to E-mail List
  7. Continue Building and Iterating Based Upon Feedback 

We will support clients through each step of the product validation process.  The more of this process that can be completed prior to submitting the endorsement application, the better.  However, we recommend that clients complete steps 1-4 as a minimum. 

Following this business idea validation process is not a guarantee of success and it most certainly isn’t easy. It’s not as simple as putting up a waiting list and hoping people miraculously discover your offering & fork over their hard-earned money for something that doesn’t exist yet. It will take work to build confidence, inspire trust and convince a community that you’ll be able to deliver enough value in exchange for the price you’re asking.   

If after evaluating the potential of your business you are still excited about the business and the scale of the opportunity, then it's time to plan the business launch and move forward with the endorsement and visa application process. Please understand, we do not need to know everything before we do anything, but often a pause for thought at this stage helps avoid wrong turns and cul-de-sacs further down the road. If you want to help to stay on track, please contact us here at Continuous Business Planning today and discuss how our business and project support services can help you develop that winning idea into an Innovator Founder Visa, a profitable UK business, and ultimately indefinite leave to remain in the UK.