As privacy is a significant concern, how does my startup respect privacy and also track user activities to improve customer experience?
If they don't really care, and to a first approximation that's going to always be the case, then you're mostly distracting yourself from what your customers want/need to solve their actual problems.
And it's attractive because "respecting privacy" is easier than making something people want in the sense that it is vague and sounds good and unmeasurable. This makes "success" a moveable target..."we respected fifteen privacys a minute last quarter" doesn't mean anything.
If you're in business, be in business and do business things. Because that's what you will do if you stay in business. Good luck.
Also avoid sharing too much information about your users if using a third party provider for analytics. It shouldn’t be more than an user ID