When ready, they will be able to enter the EU market quite easily, but at least with capital and size they can do the work necessary to feel comfortable in their compliance. Until then, EU citizens don't get access to the company. This is what I mean about regulations favoring the larger companies. It's almost always the case.
It's not that hypothetical as I've been in this with young companies where we were deciding where to launch first (for beta or actual launches). Granted there was nothing then precluding EU users in those times, in fact we preferred it to help w/ i18n vetting. Nowadays, I'd just as soon leave EU countries off of the select box on my signup form, and not worry about GPDR compliance (again, even though I am probably compliant and believe in the spirit of the rules).
And as of the earlier arguments like “no loss” or “competition would step up” - look how few EU tech companies there are. There’s a reason for that.
The armchair commenters here aren’t EU business people, and it shows. Around here, GPDR is considered a disaster, in the usual style of EU’s heavy-handed, poorly thought-out regulations. It adds so much bureaucracy and expenses - even for companies that do nothing shady - that it is absurd.
If I were a VC, I'd tell my companies that didn't need EU customers yet not to sell to them until they are large enough to make sure they won't fall afoul of rules. Regulations almost always benefit the larger companies, even if they are well-intended. Smaller, more nimble companies almost always thrive in more open environments. Citizens of more open and less restriction/regulation encumbered environments often get a larger variety of businesses to use (sometimes to a fault, like tracking).