Source: Jian Jia, et al., “How Does Privacy Regulation Affect Transatlantic Venture Investment? Evidence from GDPR,” (Working Paper 33909, National Bureau of Economic Research, Cambridge, Massachusetts, June 2025).
Commentary: In 2016, the European Union (EU) passed the General Data Protection Regulation (GDPR), a privacy law with strict rules on how firms operating in the EU can collect, process, and store consumer data. The law came into effect in 2018, subjecting firms that violate the law to significant fines. A report by Jia et al. assesses the impact of this strict data privacy regulation on the willingness of U.S. venture capital (VC) investors to invest in European ventures. In analyzing the size and location of nearly 100,000 investment deals across the EU and the United States between 2014 and 2019, the researchers find that, after the rollout of the GDPR, the number of investment deals led by U.S. investors in the EU was 21 percent lower than the number of deals in the United States. In terms of total value, the amount invested fell by 13 percent, resulting in a $1.6 billion reduction in VC flows from the United States to the EU annually. Over time, the impact of the GDPR on VC investment has weakened, suggesting that markets have gradually adapted to the regulations.
