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).

YC is responsible for Sam Altman, need I say more?

When you put it that way, the answer is obvious:

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.

It seems like in the last number of years, VC has been prioritizing becoming the beneficiary of the whims of the regime.

In short, I wonder if this has any implications about their confidence in startups' viability in private sectors