Companies are hopping on the AI bandwagon for a bigger paycheck

This week, MMC Ventures (a London-based venture capital firm), published a study indicating that 40% of the companies branding themselves as AI startups in Europe don’t actually use AI technology

Required reading: We don't have time to get into it now, but If you want a crash course on AI, its implications and applications, this is a great place to start.  Movin' along.

Take Skyscape for example (paywall), a company that literally writes on their homepage that they, “use AI to analyse rooftops and identify opportunities to maximise utilisation and address urban challenges.” In reality, Skyscape’s products do not yet implement any AI technologies whatsoever. 

So why would a company claim to use AI and brand itself as an AI startup if it doesn’t yet use AI?

The answer: 

Can I buy a vowel or two?

MMC found that since 2015 AI companies have raised between 15 and 50 percent more funding than traditional software companies -- AI startups score higher valuations as well. 

With that AI “bump” in mind, it’s no surprise that 8% of European startups are now AI-focused, as opposed to just 2% five years ago. 

The Blockchain Buzz

The study’s findings, while shocking, are hardly a new phenomenon -- companies piggyback on the hype surrounding new technologies all the time. 

Take the blockchain craze for example. At the end of 2017, Long Island Iced Tea Corp. (which, you guessed it, is a company that makes Iced Tea) renamed itself Long Blockchain Corp. The company’s stock price nearly tripled following the rebrand. Now that is a pivot.

Of course, the iced tea company never made any real investment in blockchain technology and the SEC launched an investigation into Long Blockchain Corp at the end of 2018. The company’s value then promptly dropped from $70 million to $5 million.

We’d like to believe that investors do their due diligence on a company’s technology before throwing money at it -- but clearly that’s not always the case (don’t get us started on Theranos).

There is obviously meaningful work being done in pioneering fields like AI and blockchain, but as with any new technology, you should be wary of the buzz. 
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Brendan Uyeshiro
Brendan Uyeshiro