Plus it leaves the market open for other businesses who are actually compliant so they can capture a bigger slice of the market than the existing services. There really is a lot to win.

if a preexisting startup doesn't care for the market, its probably because it's too small to be worth it. This is not 1999, most ideas have been tried at least once. And experience shows that "extra privacy" is just not a selling point.

> if a preexisting startup doesn't care for the market, its probably because it's too small to be worth it.

It's not just that. It's that there is no money in cloning unsuccessful startups. Nobody wants to copy you until you're a success, but by then it's too late. By then the first mover has the momentum and resources.

This doesn't change that. By the time a startup becomes successful it will have the resources to pay compliance costs and enter the other market.

The problem is that having to exclude EU users until you're big enough to afford compliance will cause more ventures to die on the vine, before they ever become successful enough for anyone to want to copy them.

It also puts the local EU startups at an obvious disadvantage, because they have to pay the compliance costs up front instead of only after proving themselves in the US market.