Forty percent of ‘AI startups’ in Europe don’t actually use AI, claims report

Artificial intelligence is one of today’s most misused terms in tech, and apparently a new study confirms how hyped the technology has become.

According to the London venture capital firm MMC survey, 40 percent of European startups classified as AI companies are not actually using artificial intelligence in a manner that is “material” to their business. To reach its conclusion, MMC studied some 2,830 AI startups in 13 EU countries, reviewing each company’s “activities, focus, and funding.”

“In 40 percent of cases we could find no mention of evidence of AI,” MMC head of research David Kelnar, who compiled the report, told Forbes. Kelnar says that this means “companies that people assume and think are AI companies are probably not.”

As Forbes points out, the claim that these startups are “AI firms” does not necessarily come from the firms themselves. Third-party analytics sites are often responsible for classification, and it is not clear from MMC’s report what percentage of fake AI startups it identified were actively misleading their customers.

But the findings of the report show that if they are misclassified, there are clear incentives for companies not to speak up. Obviously, the term “artificial intelligence” is catnip to investors, and MMC found that startups claiming to be working in AI attract between 15 and 50% more funding than other companies.

As Kelnar told Forbes: “I think in most cases [startups] will be aware of how they’re being classified.” They just don’t care to correct the record.

MMC’s report found that the use cases are often quite banal when companies deploy artificial intelligence and machine learning. Chatbots (26 percent of companies) and fraud detection (21 percent) were some of the most popular ways the startups surveyed used AI. It is tricky in both cases to judge exactly how much customers benefit from this technology. Chatbots are often annoying to navigate and can be a way to simply eliminate the cost of supporting human customers. And while detection of fraud is certainly useful for both customers and businesses, it is more an auxiliary service than a central point of sale.

But as we’ve learned with the proliferation of gadgets such as artificial
intelligence-powered toothbrushes, just because something says it’s AI, it doesn’t mean it’s in fact or it’s even important. Artificial intelligence is a term that includes a wide variety of technologies and, apparently, a lot of hype.

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