The Big Story: New research shows state privacy patchwork costs startups hundreds of thousands
Startups spend hundreds of thousands of their limited resources on privacy compliance, much of which goes to duplicative activities that don't further users' privacy, according to a report Engine is releasing today. The report, Privacy Patchwork Problem, chronicles the steps startups are taking to protect the data of their users and enumerates the costs, burns, and barriers startups encounter—which reach into the hundreds of thousands of dollars. It underscores the need to give for a federal privacy framework that creates uniformity, promotes clarity, and accounts for the resources of startups, while creating consistent rights for their users located in every state across the country.
Data privacy has been top of mind for consumers, policymakers, regulators, companies, and entrepreneurs for the past several years, and Congress came closer than it ever has to passing a federal privacy law last year. In the absence of a federal law, states have been tackling privacy legislation in their own legislatures, creating a patchwork of varying laws, even if they are similar and purport to do similar things. This patchwork creates confusion and uncertainty for startups that want to comply, and it weighs on their competitiveness. As Ben Brooks, Founder and CEO of the New York-based startup PILOT explained, “We care a great deal about privacy and we want to be compliant, but it can be very expensive and complex…Privacy law is built around sophisticated multinational large businesses, so as a startup we have to learn how to work within a system that isn’t made for us.”
Startups need a federal privacy framework that works for them, and the report provides the insights policymakers need to be sure they get it right. With a federal data privacy law that streamlines some of the burdens of the current landscape, startups will be more competitive and able to invest more in hiring, research and development, and growing their businesses. It’s time for policymakers to move forward with legislation to create privacy protections for every American and certainty for the startups that serve them.
Policy Roundup:
TikTok hearing dominates the Hill. Capitol Hill zeroed in on TikTok—and related privacy, government surveillance, and content moderation concerns—this week as CEO Shou Zi Chew appeared before the House Energy and Commerce Committee Thursday amid re-intensified concerns about the company’s connections to the Chinese Government. While many members of the committee called for a ban of the app in the U.S. in response to their national security concerns, the hearing included criticism of broader technology policy issues, like content moderation or the impact of social media on young users. Several members of the committee called for a federal privacy framework as part of the solution to the issues raised by TikTok, which is a more comprehensive way to address concerns about data privacy across the whole economy.
The impact of SVB’s collapse on innovators and what policymakers need to keep in mind. This month, the Silicon Valley Bank (SVB)—a mainstay bank for the global startup ecosystem—collapsed, creating uncertainty for banks and the startup ecosystem as the fallout continues to unfold. This week, we published a blog post exploring what the collapse means for startup founders and funding, the broader implications for the U.S. banking system, and how policymakers must continue to act to prevent long-term damage to the startup ecosystem.
Utah Governor signs controversial social media bills. On Thursday, the Governor of Utah signed into law two bills aimed at curbing social media use by minors in the state. The bills would together require age verification of all users, require parental approval for users under the age of 18 to maintain accounts, and create a private right of action coupled with a legal presumption that social media is harmful. As we previously noted, the legislation carries myriad negative side effects for user privacy, and expression online, and is likely unconstitutional.
Congress talks digital trade. This week, committees in both chambers of Congress held hearings to explore U.S. trade policy and touched on critical areas for startups like digital trade. The hearings, before the Senate Finance and House Ways and Means Committees, featured U.S. Trade Representative Katherine Tai examining President Biden’s 2023 Trade Policy Agenda. Several members’ remarks underscored the need for strong digital trade provisions in current trade negotiations, like the Indo-Pacific Economic framework. Strong digital trade provisions that build on the USMCA digital trade chapter are needed for startups to realize the benefits of trade and succeed abroad.
