Not "Did you say I can 5x my ROI? Here, shut up and take my money!"
Capital eschews no profit, or very small profit, just as Nature was formerly
said to abhor a vacuum. With adequate profit, capital is very bold. A certain
10 per cent. will ensure its employment anywhere; 20 per cent. certain will
produce eagerness; 50 per cent., positive audacity; 100 per cent. will make it
ready to trample on all human laws; 300 per cent., and there is not a crime at
which it will scruple, nor a risk it will not run, even to the chance of its
owner being hanged. If turbulence and strife will bring a profit, it will freely
encourage both. Smuggling and the slave-trade have amply proved all that is
here stated.
And mind you, VC are people who are both pretty good at earning money and also eager for even more money. That's how they got to where they are, after all, not necessarily by being virtuous (over a certain minimally required amount, or a social signaling of possessing such an amount).
Assume VCs are brainless profit maximizers who don't understand ethics. How do you get them to say "I'm gonna stop you right there"?
Answer: Make it unprofitable to collect this data. Change the incentives.
So really, the correct answer IS on the legal level. Make a set of laws which make it burdensome at best and completely unprofitable at worst, and then the incentives within the system aligns.
In short, I wonder if this has any implications about their confidence in startups' viability in private sectors