40% of AI startups could be cashing in on hype
The phrase artificial intelligence (AI) carries a certain cutting-edge allure about it— one that marketing teams in the vast world of technology, and investors alike, are drawn to.
But, according to a new survey from London venture capital firm MMC and first reported by Forbes, just 60 percent of European startups that classify themselves as AI companies actually use the technology as “material” to their value proposition.
Findings were based on the activities, focus and funding of 2,830 purported AI startups in the 13 EU countries most active in AI— including Austria, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom, which combined account for 90 percent of European GDP.
“We looked at every company, their materials, their product, the website, and product documents,” says David Kelnar, head of research for MMC, told Forbes.
“In 40% of cases we could find no mention of evidence of AI,” said Kelnar, adding that in such cases, “companies that people assume and think are AI companies are probably not.”
It’s worth noting at this point, that these companies are not necessarily promoting themselves as being AI firms, but were being classified as such by third-party analytics websites, but weren’t correcting them. Those include websites such as Crunchbase and CB Insights.
According to the MMC, startups labelled as being in AI attract 15-50 percent more funding than other technology firms. “I think in most cases [startups] will be aware of how they’re being classified,” Kelnar added.
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That said, real adoption of AI is certainly happening more and more. Since 2015, the percentage of AI startups as a percentage of all startups founded each year has risen from 3 to 8 percent.
Meanwhile, the number of startups who use AI as part of their products or services has grown to one in 12, up from one in 50 about six years ago, while 12 percent of large companies use AI in their business, up from 4 percent in the past year.
However, the study also said that the most common use of AI was in chatbots (26 percent) and fraud detection (21 percent)— both are not exactly groundbreaking uses. Chatbots are questionable in their impact on the end user and fraud detection is useful, if less a central selling point.
Over time, says the report, the distinction between ‘AI companies’ and other software providers will blur and the disappear as AI becomes more pervasive.
In the meantime, there will be those companies that have the technology at the heart of their value proposition, and a considerable amount that are just enjoying the hype.