Fact of the Week: Venture Capital Invested in EU Technology Firms Has Fallen by More Than 50 Percent Since GDPR

Venture capital invested in EU technology firms has fallen by more than 50 percent since the implementation of GDPR.

Source: Jian Jia, Ginger Zhe Jin, Liad Wagman, “The Short-Run Effects of GDPR on Technology Venture Investment,” NBER Working Paper No. 25248, November 2018.

Commentary: The General Data Protection Regulation (GDPR), which significantly increased data privacy requirements and imposes harsh penalties for violations in the European Union, came into effect in May. Despite some wishful thinking by its proponents, it was widely predicted that GDPR would hamper European technology firms’ ability to compete globally. A recent study has validated that prediction, finding that since May, there have been 18 percent fewer venture capital deals with technology companies and that those deals have been 40 percent smaller than would be expected relative to the historical relationship between US and EU ventures. Together, those figures represent more than a 50 percent reduction in total funding, for a loss of more than $4 billion annually that European firms would have raised if not for GDPR.