Are you a necessity-based or opportunity-based entrepreneurs | Blog | Foundation East

Are you a necessity-based or opportunity-based entrepreneurs

Towards the end of Hugh Muir’s often insightful, quietly brilliant and (I hasten to add) ironically-titled Hideously Diverse Britain column in the Guardian yesterday there was a reference which piqued my interest. He quotes someone referring to ‘necessity-based’ as opposed to ‘opportunity-based’ entrepreneurs. Not constructions I’d ever come across before but from the context I realised that this was clearly an established phraseology and was prompted to take a brief wiki-tour around the subject.

So the idea is that entrepreneurs can be divided into these two categories according to their motivation for starting up an enterprise. Obviously like many a there-are-two-types-of-people theory , in the real world it will not always be that simple - there are few things as complex as an individual’s true motivations for his actions - but nonetheless I think the distinction deserves some consideration.

The necessity-based entrepreneur’s motivation is characterised by need – he has no money, can’t find employment and so the only route he sees to make ends meet is to fend for himself. An extreme example that sprang to my mind was someone who survives by scavenging for saleable recyclables at a waste disposal site, something we have probably all seen in one documentary film or another.

The ‘opportunity-based’ entrepreneur by contrast is said to be driven by the fact that she has, or at any rate believes she has, identified some sort of gap in the market, or situation in which she can exploit her skills. Easy enough to come up with extreme examples here I think, successful and admired (over-admired? We’ll leave that for another day) Branson types are hardly thin on the ground in these days.

I notice that the distinction could probably also be couched in other terms, or at least has these other corollaries: the former type has no option other than entrepreneurship, whereas the latter is making a definite choice; the former almost by definition has no access to capital or any marketable skills, whereas the latter probably has at least some of both. Considering all of this it would seem obvious that the opportunity-based entrepreneur has a much better chance of success in their venture than the needs-based one. But interestingly, at least as far as I can gather from the few sources I found, there is no compelling evidence that this turns out to be the case. Perhaps the very strong driving force of actual necessity outweighs the combination of opportunity-skills-capital.

Unsurprisingly given the relatively developed and wealthy country in which we operate, all of Foundation East’s clients would have to be considered much more opportunity- than necessity-based when looked at on a global level . But all things are relative and amongst the many start-ups to which we have lent, I am sure our staff could identify some who tended at least a little to the necessity-based characteristic, and it seems clear to me that our social mission is better fulfilled when we are helping more of this type.

1.Including even the best and most paradoxical of them which is ‘there are two types of people in this world – those who believe that people can be categorised into two types and those who realise that this is a folly.’

2. There is some excellent data from the Global Entrepreneurship Monitor organisation here for your perusal but for example, broadly speaking, only 1 in 20 entrepreneurs might so report themselves in a rich northern European country compared to as many as half in a poor southern hemisphere country.

David Bell, Director