EU Customers Are Signing Up. Is My US Startup Breaking GDPR?

Your startup is beginning to attract customers from Europe.

The signups are increasing, your product is gaining traction, and personal data from EU users is automatically being stored on servers in the United States.

Everything seems to be working exactly as planned. Then someone asks whether your company complies with the General Data Protection Regulation (GDPR).

You immediately think of large European businesses with offices across the EU.

Your startup doesn’t have a European office, so surely GDPR doesn’t apply. Unfortunately, that assumption is often wrong.

GDPR can apply to companies outside Europe if they offer products or services to people in the European Union or monitor their behavior. For startups, failing to understand these rules early can create significant legal and financial risks as international growth accelerates.

GDPR Can Apply Even Without a European Office

Many founders believe GDPR only applies to businesses established in Europe.

That is not how the regulation works. GDPR generally applies to companies that:

• Offer goods or services to individuals in the European Union.
• Monitor the behavior of people located in the EU.

A US startup can therefore become subject to GDPR simply by serving customers in Europe, even if it has no offices, employees, or subsidiaries there.

Sending Data to the US Is an International Data Transfer

When personal information collected from EU users is stored or processed on servers in the United States, that generally becomes an international data transfer under GDPR.

Those transfers require a lawful legal mechanism. Several options may be available, including:

• Certification under the EU-US Data Privacy Framework.
• Standard Contractual Clauses (SCCs).
• Limited situations covered by Article 49 derogations.

Choosing the appropriate transfer mechanism depends on how your business collects, stores, and processes personal information.

The EU-US Data Privacy Framework

The EU-US Data Privacy Framework, adopted on July 10, 2023, allows eligible US organizations to receive personal data from the European Union after completing the required self-certification with the US Department of Commerce.

Approximately 2,700 US organizations had completed certification by the middle of 2026.

If a company has not completed the certification process, it cannot rely on the framework as its legal transfer mechanism.

Standard Contractual Clauses May Require More Than a Signature

Many businesses rely on Standard Contractual Clauses (SCCs) when transferring EU personal data.

However, signing the clauses alone is not always enough.

Following the Schrems II decision, businesses using SCCs generally also need to complete a Transfer Impact Assessment (TIA) and may need additional safeguards, such as encryption or other supplementary measures.

Many organizations maintain SCCs alongside the Data Privacy Framework so they have an alternative transfer mechanism if circumstances change.

GDPR Penalties Can Be Significant

Many startups assume regulators focus only on large multinational companies.

However, GDPR applies regardless of company size if its requirements are triggered.

The maximum penalty can reach 4% of worldwide annual revenue or €20 million, whichever is higher.

While enforcement depends on the facts of each case, these potential penalties demonstrate why founders should understand international data transfer obligations before expanding into European markets.

Privacy Documentation Matters

International data transfers should be reflected in your privacy documentation. For example, your privacy notice should accurately explain:

• That EU personal data may be transferred to the United States.
• Which legal transfer mechanism your company relies upon.
• How individuals can exercise their GDPR rights.

Founders should also have a process for responding to requests from individuals seeking access to, correction of, or deletion of their personal data.

Common Founder Mistakes

• Assuming GDPR applies only to companies located in Europe: Serving customers in the European Union may bring a US startup within GDPR’s scope even without a European office.
• Transferring personal data without a lawful transfer mechanism: Sending EU personal data to US systems generally requires an appropriate legal basis, such as the EU-US Data Privacy Framework or Standard Contractual Clauses.
• Using Standard Contractual Clauses without completing a Transfer Impact Assessment: SCCs often require additional analysis and, where appropriate, supplementary safeguards rather than relying solely on the contract itself.
• Failing to update privacy documentation: Privacy notices should accurately explain international data transfers and the rights available to EU users.

10-Minute GDPR Data Transfer Self Check

• Do I collect personal data from users located in the European Union?
• Is any of that data transferred to systems in the United States?
• Have I identified the lawful transfer mechanism my company relies upon?
• If I use Standard Contractual Clauses, have I completed a Transfer Impact Assessment?
• Does my privacy notice explain how international data transfers occur?
• Can my company respond to GDPR data subject requests?
• Do I know my exposure to 4% of global revenue?

If you cannot answer yes to these, do not move another byte of EU data until you close the gaps.

Bottom Line

Expanding into Europe creates exciting opportunities for startups, but it also introduces important GDPR obligations. Companies that collect personal data from EU users should understand when international data transfer rules apply, implement an appropriate legal transfer mechanism, and ensure their privacy documentation accurately reflects how personal information is handled. Addressing these issues early is generally much easier than responding after regulatory concerns arise.

Want to Map Your Data Before You Write Another Privacy Policy?

Download our free Data Mapping Worksheet to identify how personal data moves through your product, uncover potential GDPR compliance gaps, and build a stronger foundation before updating your privacy documentation or expanding further into European markets.

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