4 Motives Driving the New Wave of Startups

By Gwynneth Anderson

Over the past few years, the faces have changed but the refrain remains the same.

"Companies won't hire me because I'm too old, I'm too young, I've been out of the workforce for too long, my industry imploded, my industry was outsourced…" 

These are the circumstances affecting the millions of unemployed who want to work but who are finding it tough to land a new job. Instead, they're stuck watching Congress play political chicken while jobs continue to vanish.

 It's enough to make a person fight back. 

Frustration is driving people to do just that. Last year, USA Today reported that 8.9 million Americans started their own business while MSNBC reported that 40% of all Millennials, the one generation probably most hurt by the recession, are looking to take the serial entrepreneur's route to success. 

Why are so many taking this path of entrepreneurship? 

Reason #1: A Lack of Options 

"I think there are two kinds of entrepreneurs in a recessionary economy," says Sander Daniels, co-founder of Thumbtack.com. 

"Some are forced entrepreneurs and others are willing entrepreneurs. Some are laid off or graduated from college and can't find work." Others, Daniels says, may already have a job, but "see opportunity and choose to start their own businesses."

Contrary to popular opinion, not everyone dreams of running their own business. The hours are long and in the beginning, the rewards are few. 

Starting up a business for these forced entrepreneurs is the last ditch option, a final attempt to save the house and keep the electricity on. "It's a new paradigm," agrees Willie Jolley, author of Turn Setbacks into Greenbacks. "People have become accustomed to getting a college degree and cruising through life. Now, you have to work harder, take some risks."

Yet there is an ironic sense of freedom when there's nothing left to lose. "When you don't have a job, there's a lot less to risk than when you are making $100,000 per year," points out Ethan Austin, co-founder of GiveForward. 

"When you have those golden handcuffs, the opportunity costs are too great. I've always said that the single hardest thing about becoming an entrepreneur is taking the leap. But life's too short to be doing something you don't love."

For those who kept the business ownership thought tucked away in the back of their mind while they maintained a day job, recessions are often the necessary kick in the pants to jumpstart the dream. 

"Tough times make you open your eyes," says Jolley. "The cheese has moved and people are starting businesses because they have skill sets that they can use. Walking dogs, cooking food, or consulting for people who want a job done but don't want to pay benefits -- these days you have to think differently to get results. You have to be proactive and creative."

Reason #2: Finding Needs and Filling Them

Sander Daniels explained to us how his online business, Thumbtack.com began: "In our case, we thought the market for hiring local service professionals was not efficient," said Daniels. 

"Why is it that you can go online and buy any product you want but you can't do the same for tutors, handymen, dog walkers, or other local services? Why is there no 'Amazon' for local services? With our business, we are trying to help local consumers connect with local businesses more easily." 

The company definitely found its niche. As of October 2011, the company had over 200,000 businesses listed on its site with almost 1,000 new businesses signing up every day. 

Another need revolves around the harsh reality of medical costs where even those lucky enough to have insurance coverage still face crippling medical bills and bankruptcy. 

Ethan Austin's fundraising company, GiveForward.com, also developed as a solution to an everyday problem. "Even with insurance, most people will have about $8,500 to $10,000 that insurance won't cover for something like cancer," says Austin.

"This is causing bankruptcy every 30 seconds and causing 60% of all bankruptcies. Our company allows the community to come together through free, personal fundraising websites [and] empowers friends and family to answer the question, 'what can I do to help?'" 

[InvestingAnswers Feature: The DOs and DON'Ts of Starting Your Own Business]

Reason #3: It's Become More Affordable 

Not all industries have suffered a slowdown in today's struggling economy.

Wall Street-weary investors seeking better returns have placed their bets on tech and e-commerce startups. It's made the two industries a hotspot in a cold economy.

"The recession hasn't been as much of a burden as I expected it to be when we first started," explains Daniels. "Typically, when you start, you need investors. But now there are investors who are looking for riskier investments [like tech and e-commerce startups] because a lot of the [industries] they used to invest in are doing terribly."

Entrepreneurs have been attracted to these industries as well, but for a different reason.

"In the tech start up world, there has never been a better time to start your own business," points out Austin. "Startup capital costs have dropped. That's a big reason why a lot more people are starting companies -- it's become more affordable." 

Part of this affordability comes from accelerator labs like Y Combinator or Voivoda Labs that are easily accessible and are now popping up all over the county.

Specifically focused on niche market offerings, accelerators offer hands on expertise and mentoring in addition to funding to help startups reach the next level. 

"We went through accelerator labs -- it was like day and night -- and they helped us into an incredible trajectory."

Reason #4: A Calling to Make a Difference

For some, it goes beyond just money.

Interestingly enough, Gen Y, the generation most affected by this recession, seems the most optimistic about making a positive change. 

"I decided I didn't want to compete in a field where I always had to outsmart the competition," says Austin. "I thought I could do more good for the world and ultimately make more money in a field where I could simply out-CARE the competition." 

The Investing Answer:"Making a change and having the ability to join these non-profits and start companies, it's a luxury," says Daniels. "We just feel that this time offers a unique opportunity for this generation."

We hope we're starting to inspire the inner-entrepreneur in you. So in case you're thinking about leaving the daily grind to be your own boss, check out these 5 Reasons You Should Be Self Employed.

Not everyone is cut out to be an entrepreneur though, and it's not all roses. Check out four startup owners' real stories in 4 Tough Realities of Starting Your Own Business.