Nikolas Kairinos, CEO and founder, Fountech, considers the ‘The State of AI 2019: Divergence’ report and warns of the consequences of incorrectly labelling a business as being AI-led.

Last week, MMC Ventures released ‘The State of AI 2019: Divergence’ report. It shed light on some of the major trends shaping the artificial intelligence (AI) industry in Europe and, perhaps most interestingly, the report also revealed the number of companies cashing in on the hype without, in fact, having much to do with AI technology at all.

Let’s first consider the positive findings of the report; most importantly, one in 12 new startups in Europe is now AI-led (up from one in 50 in 2013). Meanwhile, the UK remains at the forefront of this technological revolution, boasting nearly 500 AI startups; a third of the European total and twice as many as the next most active country.

But there’s a catch – it turns out that 40% of European startups that are classified as AI companies don’t actually use the technology in a way that is “material” to their business. So why are so many startups falsely labelling themselves as AI businesses? And what are the drawbacks to this trend?

The wider implications of cashing in on the hype

Being classified as an AI startup in the current climate naturally has its benefits. For one, it’s a great way to attract investors and secure funding for a business – MMC found that startups claiming to work in AI attract between 15 to 50% more capital in their funding rounds compared to other companies.

More generally, when competing for clients and customers, stating that you’re an AI-driven business can prove fruitful. Indeed, the same tendency was prevalent when cloud computing and big data burst to prominence; companies know that potential clients are drawn in by these buzzwords and look to capitalise on it, often by exaggerating their own technological capabilities.

But there are some serious underlying dangers to this approach. Specifically, there is a fear that firms jumping on the bandwagon and claiming they offer AI when they don’t could over-hype the technology and spread misconceptions about its practical applications.

AI has the potential to transform our lives, but the opportunities it presents risk being overshadowed by inaccurate claims from tech firms. After all, we have only just scratched the surface of this technology, and it still has so much to offer. However, by stating that a tech solution or service is “powered by AI” when it isn’t will leave the user with a negative and unrealistic perception of what AI can actually do.

In reality, many of the ways that the startups surveyed for this report are using AI is fairly banal – employed more as an auxiliary service to a business rather than a central selling point. The report found that chatbots are the most popular form of AI technology being used by businesses (26%), followed closely by process automation tools like fraud detection (employed by 21% of companies).

While not downplaying the importance of these applications, it is difficult to judge exactly how integral they are to the overall business. Moreover, they stand as fairly common applications of AI; a far cry from some of the exciting new innovations we are seeing across the industry.

The underlying problem is that the term AI refers to a huge field of technologies, which means it can extend from the most basic forms of software automation to the kind of advanced forms of machine learning like that seen in DeepMind’s AlphaGo.

Is AI really still a mystery?

Despite the exceptional growth in the market, many people still do not understand what artificial intelligence really means. And as with any new technology, there is a risk of disillusionment if people are sold promises that ultimately fail to materialise.

It’s important, therefore, to understand what AI can do – and what it can’t. Make no mistake, AI has already made huge changes in the way society operates, but maybe just not in the way that we’ve seen in sci-fi movies. So, while we may be years away from cyborgs and nanobots, there are many practical transformations that might have gone unnoticed.

For instance, thanks to AI, we can now safeguard the personal information stored in our smartphones and online banking systems through biometric authentication; in the form of fingerprint and iris scanning capabilities incorporated into many devices.

Meanwhile, our daily routines have improved drastically without much notice. AI-enabled Netflix recommendations have saved countless hours and arguments by tailoring suggestions to our own personal preferences, while virtual online assistants mean that we don’t have to waste time trawling through internet archives or be on hold waiting for customer services to find the answers to pressing questions.

The important thing to remember is that AI is a powerful technology that has an infinite number of applications; it has changed our personal, social and work lives, and will continue to do so as its capabilities grow. The growing number of startups reaping the benefits of AI and pushing its limits is a testament to this potential.

While over-hyping AI can create funding opportunities for businesses eager to drive innovation in this field, it can also lead to more serious consequences – like damaging its long-term potential. As the market matures and people’s understanding of AI develops, businesses that falsely claim to have AI capabilities will find it harder to mis-sell their products. In turn, the startling figure that 40% of European startups are incorrectly classified as AI companies will drop significantly.

Until then, the industry as a whole has a responsibility not to use AI moniker in a misleading way. After all, in the long-term, startups will achieve little from building a business on ignorant or malicious deceit, and one would hope that good sense, innovation and real entrepreneurship will win out.


Nikolas Kairinos is the CEO and founder of – a company specializing in the development and delivery of intelligent AI solutions for businesses and organisations. Nikolas also has over 20 years’ experience supporting software startups around the world as an entrepreneur, investor and adviser, and has also co-founded numerous AI companies.