Friday, May 31, 2019

Why are there so few unicorns in Europe?

Despite a GDP that is about the same size as the US, but with about twice the population, the EU produces relatively few unicorns (billion dollar startups) because the regulatory burden is so heavy.  A recent example is the GDPR,

Controllers of personal data must put in place appropriate technical and organisational measures to implement the data protection principles. Business processes that handle personal data must be designed and built with consideration of the principles and provide safeguards to protect data (for example, using pseudonymization or full anonymization where appropriate), and use the highest-possible privacy settings by default, so that the data is not available publicly without explicit, informed consent, and cannot be used to identify a subject without additional information stored separately.

MarginalRevolution has another great post  that documents the compliance costs, especially for would-be unicorns :

  • Startups: One study estimated that venture capital invested in EU startups fell by as much as 50 percent due to GDPR implementation. (NBER)
  • Mergers and acquisitions: “55% of respondents said they had worked on deals that fell apart because of concerns about a target company’s data protection policies and compliance with GDPR” (WSJ)
  • Scientific research: “[B]iomedical researchers fear that the EU’s new General Data Protection Regulation (GDPR) will make it harder to share information across borders or outside their original research context.” (POLITICO)
  • Microsoft had 1,600 engineers working on compliance. (Microsoft)
  • During a Senate hearing, Keith Enright, Google’s chief privacy officer, estimated that the company spent “hundreds of years of human time” to comply with the new privacy rules. (Quartz)
    • However, French authorities ultimately decided Google’s compliance efforts were insufficient: “France fines Google nearly $57 million for first major violation of new European privacy regime” (The Washington Post)

37 comments:

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