Artificial intelligence is driving investment – but entrepreneurs need to be cautious about their claims
Artificial intelligence (AI) remains one of the most powerful drivers of venture capital, proving that the hype cycle is not even completed. According to a recent report, 37% of fundraising activities in the third quarter of 2024 were targeted at AI-related companies, similar to that in the second quarter. Startups using AI are attracting attention for their ability to solve big problems in robotics, automation, healthcare, logistics, and more. But the reality is that investors hear “the AI we use” all day long. The degree of entrepreneur In fact Using it makes a big difference. Investors even objected, including Goldman Sachs’ 31-page report, questioning how worthwhile AI investment is.
The Federal Trade Commission (FTC) recently announced a crackdown on companies that filed deceptive AI claims. This “AI Wash” – AI that doesn’t support AI into marketing – may get people’s attention, but it’s a fast track to lose credibility. Founders need to be clear and honest about how AI can adapt to their business. The focus must be on practical innovation, not just chasing buzzwords.
It is crucial to avoid situations like Theranos, where bold claims have no substance and lead to serious consequences. AI’s bets are even higher because the technical complexity makes it difficult to verify the claims of how it is used and is more susceptible to abuse. According to the insurance company, 38 AI-related securities class action lawsuits were filed between March 2020 and October 2024, of which 13 occurred in 2024 alone.
The attraction of AI to investors is more than just technical complexity. It’s about solving important issues and creating real business. Founders who take shortcuts or exaggerate their AI capabilities have the potential to alienate the supporters they are trying to attract. With regulatory reviews, market growth is becoming increasingly acute and delivering substances is crucial.
The wide influence of AI
Artificial intelligence contains far more conversational AI tools that dominate headlines. Patrick Winston, a late computer scientist and professor at MIT, outlines the fundamental elements of AI in his seminal textbook, Artificial Intelligence. Before large language models capture public imagination, AI is driving advances in problem solving, quantitative reasoning, and algorithmic control. These roots highlight different applications of AI that go beyond chatbots and natural language processing.
Consider the role of AI in robotics and computer vision. For example, Simultaneous Localization and Mapping (SLAM) is a groundbreaking technology that enables machines to navigate and interpret environments. It supports critical autonomous systems and embodies AI’s ability to solve complex technological challenges. Although not as widely recognized as large language models, these advances are equally transformative.
Having considered areas such as speech recognition and computer vision for AI innovations, it has since grown into different disciplines, changing the industry in the process and losing the “AI” label in many cases. Voice recognition has revolutionized accessibility and voice-driven interfaces, while the power of computer vision can advance in areas such as autonomous vehicles, medical imaging, facial recognition and retail analysis. For the founders, this emphasizes the importance of expressing how its innovation fits into the broader landscape of AI. Shows that a slight understanding of the scope of AI allows startups to stand out in an increasingly competitive funding ecosystem.
For example, machine learning models can optimize supply chain logistics, predict equipment failures, or implement dynamic pricing strategies. These applications may be the same as chatbots, but they offer great value to industries focused on efficiency and innovation.
Speak the language of investors
When communicating with founders using AI, founders should focus on measurable impacts such as increased efficiency, better user outcomes, or unique technological advantages. Many investors are not technically tech- so they must present AI capabilities in simple, accessible languages. Explain the role of AI, how it works and why it is important to build trust and credibility.
Investors are getting tired of hearing the term “AI” and worrying that entrepreneurs are over-branding businesses with technology rather than how to help them solve their problems. AI has become a table bet for many industries and its role should not be exaggerated in the company’s strategy.
It is also important to transparency. With the FTC hitting the exaggerated AI proposition, it is really necessary to what your technology can and cannot do. Exaggerating the functionality may cause initial interest, but it can quickly backfire, resulting in reputational loss or regulatory scrutiny.
Founders should also emphasize how their use of AI is aligned with wider market opportunities. For example, using AI for predictive analytics, optimization, or decision-making systems can prove vision and innovation. These apps may not dominate headlines like chatbots, but they address the real-world need to resonate with investors.
Ultimately, it is a tool to use AI as a driving value and solve pressing problems. By focusing on clear communication, honesty and consistency with investor priorities, founders can position themselves as trusted and forward-looking leaders in the AI field.
