Technology

Is Your Company Guilty of “AI Washing”?

Parker Conrad, founder of Rippling, a $13.5 billion-valued HR startup, recently shared his thoughts on AI during an appearance on the Found podcast.

Table of Contents

The Reality of AI in Software Products

Conrad believes that many software companies have been adding unnecessary and novelty AI features to their products, which may not be providing real value to users. He stated:

"No one actually wants to chat with their HR software beyond the sort of novelty of like, oh, my gosh, it responds to me."

This perception isn’t unfounded. According to PitchBook, in the first half of this year alone, AI companies made up 41% of all U.S. deal value. Additionally, more than 40% of new unicorns are AI startups.

The Pressure to Incorporate AI

The pressure to incorporate AI into products has led many companies to "sprinkle AI pixie dust" into their offerings, according to Conrad. This phenomenon is largely driven by the desire for investors to see a return on investment. As Conrad noted:

"They’re like ‘jeez, if I’m a SaaS company, my multiple is 7x, but if I change my name to whatever-my-name-was-before [with] .ai my multiple is like 50x’."

The Rise of AI Investment

The investment landscape for AI companies has been on the rise. According to PitchBook, AI and machine learning companies raised $38.6 billion out of the $93.4 billion invested in U.S. startups this H1. This trend shows no signs of slowing down, with Big Tech companies splashing out big bucks in GenAI startups.

The Value of AI

Nekeshia Woods, a managing partner at Parkway Venture Capital, a firm that focuses on AI, has a different perspective. She believes that AI will be transformative and automate routine tasks. According to her:

"From the consumer perspective, engagement and demand will be centered on higher-quality products and services that can be hyper-personalized to make better use of their time, like some form of self-driving cars."

The Skepticism of Parker Conrad

As a public skeptic, Conrad remains unconvinced about the value of AI agents. However, he does believe that AI will be powerful because it can read and absorb mass quantities of unstructured information.

"This means it can help a company better understand its business," he said. "That sort of solves for the problem that these things are only probabilistically and not deterministically correct."

The Need for Accountability

The excessive hype surrounding AI has led to what is known as AI fatigue, although some, like Woods, prefer to call it a question being asked about AI. When will the large investment in AI pay off?

"It’s sort of hard to see from here," Conrad said.

The Importance of Measuring ROI

As the AI landscape continues to evolve, it’s essential for companies to focus on measuring the return on investment (ROI) rather than simply adding novelty features. By doing so, they can ensure that their efforts are providing real value to users and driving business growth.

Conclusion

The rise of AI has led to a mad scramble for companies to incorporate AI into their products, often without providing real value to users. However, by focusing on the true potential of AI, companies can unlock its transformative power and drive business growth.