Ritvik Sahajpal is a 23-year-old York University graduate who works in business development for Baseline, a made-in-Toronto venture-backed startup that makes software for private real-estate lenders. 

Sahajpal is a good hunter. He crept up behind me at a finance conference this spring and got me talking. He quickly discovered that he hadn’t trapped a prospective client. I discovered that Sahajpal might be a little crazy: he told me that he’d like to start a company of his own someday. 

“Why do I want to be an entrepreneur? There’s so many difficulties and challenges,” Sahajpal said when we reconnected over the phone this week. “But all of the growth that I’ve ever had in my life came from discovery. I never grew when I was in a comfortable position.”

Resilient economies need dreamers like Sahajpal. Entrepreneurs are the primary source of creative destruction, bringing new ideas that generate the innovation which drives economic growth. There is only one way to achieve this cycle effectively. You need a critical mass of people who are willing to subject themselves to severe personal stress, knowing that it all could end in failure. 

“It’s definitely not everyone’s path,” said Mark Coombs, co-founder and chief executive of Sleepout, a maker of portable blackout curtains. “I don’t think everyone should do it. There’s a lot of sacrifice involved,” he added. “It’s really going to push you to your physical and mental limits.”

That’s a lot to ask. But without a vibrant pool of entrepreneurs, a free-market economy might as well be a command-and-control one. 

Sleepout is a miniature portrait of how creative destruction works. It starts with an idea: replicating perfect sleep conditions away from home. That idea becomes a product, and the product finds a market: Sleepout raised almost $300,000 on Kickstarter in 2021. Then, evidence of success attracts investors: mattress retailer Sleep Country bought a 25-per-cent stake in the company after seeing the success of the Kickstarter campaign. That made Sleepout a going concern, and the economy had an additional propeller. 

Running a company is fraught with peril. Some 15,000 businesses on average disappeared from existence each month in 2023, according to Statistics Canada data. On a macro level, that’s fine as long as companies are being replaced by new ones. In fact, that churn is what makes economies dynamic. Startups spend venture money to make their ideas a reality. Hopefully, they gain traction and begin to make some money, too. That lets them continue to innovate. Earlier this year, Sleepout introduced a toxin-free blackout curtain, the result of two years of research and development. “When Sleepout first entered the market, industry experts warned that most fabrics were saturated with toxic chemicals,” the company said in a press release. “Determined to break this mould, Sleepout created its own fabric.” 

We can hope that Coombs is now on his way to destroying the market for curtains coated in formaldehyde and other chemicals. “It took a long time to find a new kind of concoction that would work and still be 100-per-cent blackout,” he said. “The product has done super well. We’re going to sell out of all of our stock again this summer, so we’re super happy.” 

Creative destruction is hard to measure. Economists who study it tend to use proxies such as company birth and death rates or self-employment statistics. The U.S.’s remarkable productivity surge is often credited to its lead in artificial intelligence and other cutting-edge technology. Less discussed is how the COVID-19 pandemic appears to have supercharged the country’s entrepreneurial spirit. Business applications skyrocketed after lockdowns ended and have stayed at elevated levels ever since. 

The charts are amazing. It’s like the world’s largest economy added a sixth gear. There’s skepticism that it can last. Still, the data suggests the U.S. economy has a stronger standing heart rate than its peers. Most of the other big Western economies continue to trundle down a declining slope, including Canada. 

A Statistics Canada paper by Huju Liu and Yan Zhang found that entry and exit rates of “business ownership”—incorporated self-employment and owners who earn most of their income from their businesses—decreased steadily between 2006 and 2020, “manifesting declining business dynamism.” There’s little in the more recent data to suggest the trend has changed. An average of 15,872 businesses entered the economy each month in 2024, down from 16,215 the previous year and the lowest since the COVID-19 pandemic. 

The data are imperfect, but they supplement anecdotal impressions that Canada has lost its entrepreneurial verve. “It’s slowed down,” said Nancy Southern, chief executive of ATCO, the Calgary-based electric utility that oversees sideline businesses in renewable energy, modular construction and defence. There’s no “silver bullet,” but Canada’s leaders must find ways to “re-energize our nation in terms of productivity, in terms of entrepreneurial thinking, in terms of the sky’s-the-limit approach that Canada has been known for in the past.”    

Canada’s entrepreneurial heartbeat might be even weaker than a superficial scan of the data suggests. Statistics Canada’s employment numbers go back almost 50 years, to 1976. That’s enough information to reveal patterns if you have the time to look. From 1976 through 2023, a category of employee described as “self-employed incorporated, no paid help” had only ever accounted for more than 10 per cent of annual employment growth in years when the ranks of the public service declined.  

This happened in 1995 and 1996, and then in 2011 and 2013. Four times in 47 years. Governments initiated austerity drives, and public servants who lost their jobs became guns for hire, but not before turning themselves into corporations so they could take advantage of tax benefits created for job creators. 

For the most part, they aren’t entrepreneurs like Coombs. They are gig workers who work the tax code to their advantage. Last year, the data suggest that there was a glitch in this pattern. “Self-employed incorporated, no paid help” were responsible for 10.3 per cent of the employment growth, even as the public sector accounted for 20.5 per cent of new hiring. The latter was the highest since the Great Recession in 2009, excluding 2020, the first year of COVID-19, when governments were effectively the only entities in a position to add workers. 

Technologies such as artificial intelligence let individuals do more on their own. Maybe a new generation of innovators is creating intellectual property and other forms of wealth without having to assemble a team. Or maybe the labour pool is becoming populated by a greater number of consultants and gig workers. Digital platforms have made freelancing easier than ever, while the path to entrepreneurial success has only gotten harder. Southern laments a regulatory structure that impedes large companies such as ATCO, nevermind smaller companies.  

Demographics likely are a factor. Aging societies will have fewer people willing to risk it all because a disproportionate number of workers are on the cusp of retirement. And then there’s the polycrisis, including the reordering of global trade. When I spoke with Coombs a year ago, he had finally found some clear air after a few hard years of getting Sleepout off the ground. Then Donald Trump returned to the White House. Instead of maximizing the release of those toxin-free curtains, Coombs has spent much of the year navigating U.S. tariff policy and advancing plans to expand into Europe and Australia. “We definitely felt the whole upending of the world,” Coombs said. “That was really difficult.” 

An element of Canada’s productivity crisis is that we’ve layered entrepreneurship with too many additional layers of difficulty, sapping the desire of the special few who are wired to embrace the stress of starting a company. 

Sahajpal is a second-generation Canadian. He said the country has given him a lot, and he wants to give something back. “Right now, I like building the company I’m with,” but one day, “I will create an irresistible offer that someone would be dumb to resist,” he said. 

That’s the spirit. Sahajpal is young, but already voices are telling him that there are easier ways to satisfy his ambition. “In Canada, this temperament of entrepreneurship mentality, I believe, is not very strong,” he said. “Capitalism is not very much celebrated.”

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.