Startup 'AI washing' alarm...

VCS SAID THAT on average, three out of 10 startups exaggerate their AI claims.

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Some investors even suggest that in as many as 60-70% of cases, the reality of AI implementation is far from what was originally pitched.

"The rise in AI funding has encouraged many startups to re-brand traditional software as AI-powered, often without actual machine learning models or sophisticated AI implementations," said Brijesh Damodaran Nair, managing partner at Auxano Capital. Startups are increasingly incorporating AI jargon into their pitch decks and investment memos to create an illusion of advanced capabilities.

The problem prevails across various sectors. Some workflow automation or data analytics tools claim to have AI features, but they only use simple IF-THEN rules or statistical methods rather than real machine learning.