GDPR and the Importance of Data to AI Startups

Abstract

What is the impact of the European Union’s General Data Protection Regime (“GDPR”) and data regulation on AI startups? How important is data to AI product development? We study these questions using unique survey data of commercial AI startups. AI startups rely on data for their product development. Given the scale and scope of their business models, these startups are particularly susceptible to policy changes impacting data collection, storage and use. We find that training data and frequent model refreshes are particularly important for AI startups that rely on neural nets and ensemble learning algorithms. We also find that firms with customers in Europe are significantly more likely to create a new position to handle GDPR-related issues or to reallocate firm resources due to GDPR.

Keywords: artificial intelligence, automation, technology, data, data regulation, data protection, EU data protection reform

JEL Classification: O33, J21, L10