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

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


Companies want to take advantage of the AI hype

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An illustration of a cartoon brain with a computer chip imposed on top.
Illustration by Alex Castro / The Verge

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

According to the survey from London venture capital firm MMC, 40 percent of European startups that are classified as AI companies don’t actually use artificial intelligence in a way that is “material” to their businesses. MMC studied some 2,830 AI startups in 13 EU countries to come to its conclusion, reviewing the “activities, focus, and funding” of each firm.

“Companies that people assume and think are AI companies are probably not.”

“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 noted by Forbes, the claim that these startups are “AI companies” does not necessarily come from the firms themselves. Third-party analytic sites are often responsible for the classification, and it’s not clear from MMC’s report what percent of fake AI startups it identified were actively misleading their customers.

But the report’s findings show that there are clear incentives for companies not to speak up if they’re misclassified. The term “artificial intelligence” is evidently catnip to investors, and MMC found that startups that claim to work in AI attract between 15 and 50 percent more funding compared to 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.

Read more: The State of AI in 2019

MMC’s report found that when companies do deploy artificial intelligence and machine learning, the use-cases are often quite banal. Some of the most popular ways the startups surveyed used AI included chatbots (26 percent of companies) and fraud detection (21 percent). In both cases, it’s tricky to judge exactly how much this technology benefits customers. Chatbots are often annoying to navigate and can be a way of just removing the cost of human customer support. And while fraud detection is certainly useful to customers and businesses alike, it’s more of an auxiliary service than a central selling point.

But as we’ve learned with the proliferation of gadgets like artificial intelligence-powered toothbrushes, just because something says it’s AI, doesn’t mean it actually is or that it even matters. Artificial intelligence is a term that encompasses a wide range of technologies and, apparently, a great deal of hype.