New Survey Exposes Startup Challenges In The Race To Adopt GenAI

go through Yael Benjamin

The startup ecosystem is rife with the transformative promise of generative artificial intelligence, but a new report from my research firm, Start snapshotshowing that this excitement may come at a price.

In the report, Beyond the noise: GenAI’s real impact on startup buildingwe take a candid look at how startups are leveraging artificial intelligence—highlighting the opportunities, risks, and challenges that accompany this revolution. Based on a survey of more than 220 founders and 85 GenAI experts, the findings highlight the urgent need for startups to balance innovation and governance.

Unrealized potential and missing AI policies

Startup founders are attracted to GenAI’s promise of accelerating product development and reducing time to market, with 66% of C-suite executives calling it a game changer.

However, the situation is akin to the Wild West, with more than half (52%) of startups saying their employees independently select and use GenAI tools without any organizational oversight. While this self-driven adoption reflects an entrepreneurial spirit—agility, proactiveness, and quick problem-solving—it also exposes new startups to significant risks, including security breaches and misuse of AI tools.

“Startups are harnessing the huge potential of GenAI, but without clear policies, they risk sabotaging their innovations,” said Netanella Treistman, partner at Arnon-Tadmor Levy. “Adopting strategic, A top-down approach, establishing protocols for the use of GenAI tools, is critical. The current agile model (employees choose their own tools) may work in the short term, but may not work as the organization scales. come big challenges.

For startups to fully leverage the transformative power of GenAI, they must strike a balance between agility and governance to ensure their innovation efforts are sustainable and secure.

Workforce teams are unprepared for the reality of GenAI

Workforce readiness remains one of the biggest barriers to GenAI adoption. The report shows that 55% of new startups have less than half of their employees trained in GenAI, and only 15% of senior executives have invested in improving team skills.

This skills gap is driving startups to rely on outside AI expertise, forcing them to compete with large tech companies with deep pockets for limited top talent. While this strategy may meet immediate needs, it may create a knowledge vacuum within organizations, jeopardizing their ability to sustainably innovate in the long term.

Raphael Ozanfounder A.Teamhighlighted the challenge: “The leap from prototype to production is more than a technical hurdle – it’s a team challenge. Startups are finding that the key to AI-driven innovation is not just adopting the technology, but finding and nurturing the companies that develop it Talent with extensive experience in GenAI applications.

To remain competitive, startups must move beyond short-term fixes and prioritize internal talent development. Investing in employee training and upskilling can help build a foundation of expertise to support innovation and resilience as a company scales.

Excessive hype and misplaced investment

The report reveals a troubling trend: The hype surrounding GenAI has prompted some startups to exaggerate their artificial intelligence capabilities to attract investors’ attention. More than 25% of founders surveyed admitted to exaggerating the use of GenAI in their pitches. While this strategy sparks investor interest (76% of C-suite executives say investor enthusiasm has increased), it also sets the stage for false expectations and misguided investments.

Despite the growing excitement, many investors are jumping into action without fully identifying the risks. Only 7% of founders reported being asked to describe their AI policy during funding discussions. This lack of scrutiny stems from a knowledge gap: Many investors got caught up in the GenAI craze, lacked the expertise to identify potential pitfalls, and failed to ask key questions during due diligence.

The research results emphasize that investors need to pay more attention to governance and risk management when investing in GenAI to ensure that investor enthusiasm does not come at the expense of sustainable growth.

Yael Benjamin Yes founder Start snapshotis a research company dedicated to increasing transparency in the technology ecosystem. Her research is based on data collected directly from Startup Snapshot’s global community of founders and investors and covers key startup topics such as fundraising, founder mental health, investor relations, compensation and new technologies.

Illustration: Dom Guzman