Why Do People Become Entrepreneurs? Opportunity vs Necessity

Eric DawsonByEric Dawson Business

People become entrepreneurs for one of two broad reasons: opportunity or necessity. Opportunity entrepreneurs leave stable jobs on purpose, drawn by a market gap they believe they can fill for profit and growth. Necessity entrepreneurs start a business because the job market gave them no better option, often after a layoff or a stretch of unemployment. Global research puts the split at roughly three in five opportunity founders to two in five necessity founders, though the ratio shifts with the economy. Independence ranks as the strongest pull for both groups, ahead of money or status.

Why Do People Become Entrepreneurs

Two forces explain most of the decision: a pull toward opportunity and a push away from a bad job market. Opportunity entrepreneurs act because they spot a gap and believe they can profit from closing it. Necessity entrepreneurs act because no employer will hire them on terms they can live with, so self-employment becomes the fallback. Independence shows up as the strongest single motivator across both groups: researchers consistently find that founders rank being their own boss above money, status, or recognition.

Researchers label this the push pull framework: a negative shock pushes someone out of the labor market, while a positive market signal pulls them toward a business idea, according to Entrepreneurship Theories’ review of the literature. Recessions, layoffs, discrimination, and thin job markets are common pushes.

A gap in the market, a scalable idea, or a chance to build wealth are common pulls. Necessity entrepreneurship also goes by other names, including forced entrepreneurship, distress-driven entrepreneurship, and displaced entrepreneurship, all describing the same reaction to a negative labor shock. Economists treat the two forces as opposite ends of one spectrum rather than a strict either-or.

What Is an Opportunity Entrepreneur

An opportunity entrepreneur is someone who leaves a stable position on purpose to chase a market gap they believe will pay off. They are pulled toward the business rather than pushed into it, and the decision is voluntary rather than forced by circumstance.

Typical traits include creativity, a willingness to take calculated risk, prior industry experience, and alertness to shifting consumer trends. Most concentrate in high-growth, technology-driven sectors with real room to scale, which is why economies with a higher share of opportunity founders tend to see stronger GDP growth, per a 2005 analysis by Wong and colleagues.

Wealth creation and growth define the goal for this group, not survival. Fifteen percent of opportunity founders expect to create 20 or more jobs within five years, a scale that necessity founders rarely reach.

What Is a Necessity Entrepreneur

A necessity entrepreneur starts a business because no better income option exists, not because a market opportunity looked attractive. Job loss, a recession, workplace discrimination, or a thin local labor market are the usual triggers, and the goal is replacing lost income fast rather than building something that scales. Necessity founders tend to cluster in low-barrier sectors such as street vending, gig work, and small-scale retail, where startup costs are low but so is the ceiling for growth.

Eighty-nine percent expect to add no more than five jobs in five years, reflecting how survival, not expansion, drives the decision.

Necessity entrepreneurship runs higher in developing economies and in regions with sharp inequality, though developed countries see it spike during recessions too. Some researchers, including Scott Shane, argue that governments should be cautious about promoting necessity entrepreneurship as policy, since only scalable ventures reliably drive economic growth. That is a debate about what policy should encourage, not a disagreement about what necessity entrepreneurship actually is.

Opportunity vs Necessity Entrepreneurs at a Glance

The two paths differ on almost every measurable trait, from motivation to industry to growth expectations. Side by side, the contrast is easy to see.

Aspect Opportunity Entrepreneurs Necessity Entrepreneurs
Primary motivation Recognizing a market gap and pursuing wealth creation Lack of viable employment options; economic survival
Initiation direction Pulled toward business Pushed away from the job market
Economic goal Wealth creation and growth Immediate income replacement
Expected job creation 15% plan 20 or more jobs in 5 years 89% plan no more than 5 jobs
Typical sector High-growth, technology-driven Low-barrier (gig work, street vending)
Scaling potential Significant Limited
Global prevalence 61% of entrepreneurs 37% of entrepreneurs

Picture a sample of 100 new founders split along the global average: 61 pursued an opportunity and 37 acted out of necessity, with the rest reporting mixed motives in survey rounding.

Scaling that sample against the job creation figures, roughly 9 of the 61 opportunity founders, or 15 percent, plan to add 20 or more jobs within five years. Among the 37 necessity founders, about 33, or 89 percent, expect to add no more than 5 jobs in that same period.

That gap, 9 job-hungry opportunity founders against 33 necessity founders staying small on purpose, is the clearest illustration of why the two categories get tracked separately. Even a modest shift in that split, say five points toward opportunity, would meaningfully raise the number of high-growth ventures entering the economy each year.

In 2011, at an apartment-property office in the Dayton suburbs, I processed about 40 move-outs a year, and the three fees tenants disputed most were early termination, carpet cleaning and a flat “admin” fee. Opportunity vs Necessity Entrepreneurs at a Glance makes a similar check useful: separate a genuine opening from immediate pressure, because the surprise is often buried in the terms rather than absent altogether.

What Are the Seven Reasons People Start a Business

Independence tops many lists, but six other motivations show up consistently across surveys of founders. Achievement and the challenge of learning something new rank first for many, ahead of pure independence, since solving a hard problem with new tools appeals on its own. The seven reasons, ranked by how often they appear in founder research, are listed below.

  1. Achievement, challenge, and learning: solving problems with technology or a creative idea, for the satisfaction of doing it.
  2. Independence and autonomy: freedom to set goals, choose partners, and live with the results of personal calls.
  3. Income security and financial success: wealth creation, or simply financial stability when a normal job will not provide it.
  4. Recognition and status: community regard for building something, which carries different weight across cultures.
  5. Family: keeping a family business going, and the financial and social stability that comes with it.
  6. Dissatisfaction with the current job: poor management, weak pay, discrimination, or being pushed into early retirement.
  7. Community and social motivation: a wish to give back or fix a problem the founder has seen up close.

Most founders name more than one of these seven reasons rather than a single cause. A founder solving a personal problem often also wants independence and sees a chance for income, so the motivations overlap rather than compete.

How to Recognize a Business Opportunity

Opportunity recognition is the skill of spotting an unmet need and shaping it into something people will pay for. It combines three elements: noticing a gap in the market, understanding why it bothers customers, and judging whether a fix is actually viable to build. Traits that predict skill at this include creativity, comfort with risk, real experience in an industry, and staying alert to information that others scroll past.

Signs You Have Found a Real Opportunity

A real opportunity usually shows up as a pattern, not a single data point: the same complaint from different customers, a workaround people already use, or a cost that keeps rising with no fix in sight. Trends worth watching include shifts in technology, changes in regulation, and new habits that change what customers expect.

Practical Ways to Build Opportunity Recognition

Founders who get better at this practice a few habits on repeat. Staying close to industry trends, listening directly to customers instead of guessing, writing down what gets noticed, testing assumptions quickly and cheaply, and building a network that spans more than one sector all sharpen the skill over time. None of it replaces judgment, but each habit makes the next opportunity easier to see.

Why Redundancy Is Driving New Entrepreneurship in 2026

Layoffs are feeding a wave of new business formation, according to data published in April 2026. Projections point to 327,000 redundancies by the end of the year, with 56,000 jobs already flagged as at risk in the first two months alone, a 3.7 percent increase in the redundancy rate over the prior year.

Redundancy payouts are doing double duty as startup capital. Nearly £500 million in payouts went out in 2025, and a meaningful share of that money is funding new ventures rather than sitting in savings, on top of more than 700,000 new businesses formed the previous year. That volume suggests redundancy payouts are becoming a meaningful, if unofficial, source of startup funding across the economy.

Workers over 50 make up a growing share of this new entrepreneurial wave. Facing age bias in traditional hiring, many are turning decades of industry experience into a business of their own instead of another job search.

What Other Motivations Drive Entrepreneurs Beyond Money

Self-actualization plays a bigger role than many founders admit, especially among those building mission-driven ventures rather than pure profit plays. Intrinsic motivators tied to personal fulfillment and self-realization show up more strongly in social entrepreneurship than in purely economic ventures, according to research on founder psychology.

Creativity and problem-solving using a founder’s own skills and abilities drive a meaningful share of new businesses, separate from either the opportunity or necessity label. Economic motivation still sits underneath most of this, since even a mission-driven founder needs revenue to keep the venture alive.

Passion sustains effort when a venture gets difficult, turning routine work into something closer to a craft than a job. Purpose-driven founders often chase social or environmental change alongside profit, treating impact as a second bottom line rather than an afterthought.

Direct experience of a problem also positions some founders to build a better fix than an outsider could design, which is why so many products trace back to a founder’s own frustration. None of these motivations replace opportunity or necessity as the starting trigger, but together they shape how long a founder sticks with a business once it exists.

Frequently Asked Questions

Can Someone Be Both an Opportunity and a Necessity Entrepreneur?

Yes, in practice many founders blend both motives rather than fitting neatly into one box. Someone who loses a job might discover a real market gap at the same time, so the push and the pull arrive together. Current research has not published a clean percentage for how common this overlap is, so treat the 61/37 split as a simplification of a messier reality.

Is Necessity Entrepreneurship a Bad Career Choice?

Not inherently, though the odds of building a large company are lower. Necessity ventures tend to start small, in low-barrier sectors, and stay small, but plenty of successful companies started as a response to a bad job market rather than a bold vision. The bigger risk is treating a survival business as identical to a scalable one when planning next steps.

Which Type of Entrepreneur Is More Successful?

No published data in the current research directly compares success rates, profitability, or longevity between the two groups head to head. What is measurable is scale: opportunity founders create more jobs on average, while necessity founders more often aim to replace one income, not build a large company. Success depends heavily on how it gets defined.

Do Most Entrepreneurs Start a Business Out of Passion?

Passion plays a role, but it usually shares the stage with a practical driver such as income or independence. Achievement and the challenge of solving a hard problem rank above passion alone in most founder surveys. Even founders who describe deep commitment to a craft usually cite a second, more practical reason alongside it.

How Common Is Necessity Entrepreneurship Worldwide?

Roughly 37 percent of entrepreneurs worldwide report starting a business out of necessity rather than opportunity, according to global survey data. The share runs higher in developing economies and in regions with sharp income inequality, and it rises in developed economies too during a recession.

Opportunity and necessity describe two different starting points, not two tiers of founder. One is pulled toward a gap in the market, and the other is pushed out of a job market that is not offering a better option, yet independence pulls at both once the business is underway. Knowing which one applies helps set realistic expectations for growth, funding, and how quickly a venture needs to pay the bills.

References

Sources read in September 2026.

Eric Dawson

I'm Eric Dawson, and I write The Money Watch from north Columbus, Ohio. Most of what I cover comes from my own life: renting, a 2014 Honda Fit, parking, computers, food and the bills behind all of it. I spent four years in an apartment-property office and eleven on a distributor's operations desk, reading leases and invoices. Where you need real information, I research the maker's or agency's own page and independent sources and report what they publish. I don't give tax, investment, legal or medical advice.