A new report shows that only 40 percent of European startups that claim to use Artificial Intelligence in their business actually do. The startling statistic was discovered by MMC, a London-based venture capital firm as part of their research into the use of AI in business.
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Of the 2,830 startups in Europe who classified themselves as being AI companies only 1,580 accurately fit that description.
“We looked at every company, their materials, their product, the website, and product documents,” David Kelnar, head of research for MMC told Forbes.
“In 40% of cases, we could find no mention of evidence of AI.” In such cases, he added, “companies that people assume and think are AI companies are probably not.”
Kelnar added in some cases it wasn't the business that were false advertising, but that third party sites had classified them and the companies had not corrected the facts.
Investors flock to AI powered companies
There seems to be little motivation to correct the mistake when startups who are labelled as being in the field of artificial intelligence attract 15-50% more in their funding rounds than other technology startups.
Startups could be both intentionally and unintentionally hoping on the AI train to boost business and investment.
The research from MMC aimed to give a holistic picture of how Artificial Intelligence is being used in business today. The report was written after months of research and comprehensive surveys across all industries.
Mundane applications still count
It found the number of business truly using AI as part of their products or services has grown to 1 in 12 today. Up from 1 in 50 about six years ago.
Chatbots were the most common application of AI, as were automation tools. Other were using AI to do tasks like fraud detection and error checking.
These are fairly mundane uses of the potentially powerful technology but still, indeed, fall under the AI category. While it may make sense for startups to catch the coat tails of the cool factor around AI, investors should be cautious about what these so called ‘AI companies’ are actually doing.
AI use steadily increasing
The full report from MMC, which is sponsored by Barclays Bank provides an overview of what AI is and how it is used in business as well as diving into the implications of AI on future business.
Interestingly the report highlights that much of the AI tech that we are beginning to see utilised now has been around for some time, but was previously unevenly distributed. New tools are allowing the business of all sizes to take advantage of AI.
These tools are generally being brought from outside sources. With nearly half of large companies buying from third parties than building their own. Just a third said they intend to build custom AI solutions.
You can read the full report at the MMC website. The references to the European startup scene appear on page 99.