Missouri in 2019: Tech startups face fresh data concerns, standards

Consumers have gained a heightened sense of privacy in 2018 thanks to scandals involving major social media companies, most notably Facebook. The Cambridge Analytica case, which involved Facebook allowing outsiders access to millions of users’ personal information, brought consumers’ privacy to the forefront of national news.

It has not only been data breaches and privacy scandals, though, that have skyrocketed the issue of users’ privacy. The European Union’s General Data Protection Regulations, known as GDPR, went into effect in May. GDPR is the first overhaul of data protection laws in the EU since the 1995 data protection directive. The new regulations give greater protection and rights to individuals. California followed up later this year by passing its own set of stricter privacy regulations with its Consumer Privacy Act.

While covering data privacy and security this summer for Bloomberg Law, I witnessed the growing importance of consumer data privacy. Congressional hearings have been held to question Facebook CEO Mark Zuckerberg and other social media executives. Consumers were flooded with a slew of emails over the summer from companies sharing their new privacy standards. Some days, I’d attend tech events and listen to speaker after speaker discuss Cambridge Analytica, Facebook or some other privacy concern.

These factors might affect the way tech startups mold their business models and their operations going forward. Privacy concerns are here to stay.

Missouri in 2019 looks at issues important to Missouri business for the year ahead.

Ryan Weber, president of KC Tech Council, said in an email that GDPR “sent a ripple throughout all sizes of companies to comply with a new set of privacy standards.”

Technology startups that have traditionally based their business models on collecting and selling user data might have to rewire their operations. Only time will tell how new privacy legislation and scandals will shape business operations, though, Weber said.

“I think it’s too soon to tell how these policy changes will, or have, affected the way tech startups operate,” Weber said. “However, I think now more than ever, it’s imperative for any tech founder to retain a legal partner with privacy experience.”

Tech founders should also have a clear vision of how they’ll use consumer data and develop policies accordingly, John Kennedy, an attorney and privacy expert, writes in the National Law Review.

“Companies that are not particularly data intensive can spare themselves some regulatory headaches and limit their exposure to personal or sensitive consumer data by restricting the collection and storage of such data only to what’s needed to operate the business,” Kennedy writes.

Policymakers haven’t shied away from privacy concerns. Although big changes might not be on the immediate horizon, they are at least being discussed. Earlier this year, Mark Warner, D-Virginia, the Senate Intelligence Committee vice chairman, laid out 20 paths to address and regulate Big Tech in a white paper prepared by his staff. The paper addressed ways of tackling disinformation, protecting user privacy and promoting tech competition, according to Axios.

“Change is coming,” Weber said, and he thinks the increased awareness of privacy and data security presents both threats and opportunities for startups.

Big businesses are better equipped to handle compliance, but startups embrace transparency, Weber said.

“Big businesses admittedly move slower than more nimble startups,” Weber said. “However, big business has the luxury of scale and talented people with access to outside legal counsel to ensure compliance — some startups will struggle with the cost of compliance.”

Big companies tend to address transparency through “long-winded” terms and conditions, he said.

“The nimble startup, however, can often lead with transparency, and appeal more to the user,” Weber said.

The tech leader said he’s not sure which is more important — transparency or compliance. But, he said, customers will prefer to buy from more transparent brands as they “become more educated on how tech companies use their data.”

Kyle LaHucik reports on general business news for Missouri Business Alert and helps pen the Morning Minutes newsletter.

You can reach him by email or find him on Twitter at @kyle_lahucik.

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