The cost of AI washing is not the same for everyone

AI accounted for 63.3% of all venture capital deployed in the twelve months to Q3 2025, according to PitchBook — the largest concentration of investment in any technology category in recorded venture history. And, proportionally, the largest concentration of founders who have discovered that "AI-powered" fits in a tagline regardless of what the product does.

Regulators noticed. In February 2025 the SEC created a dedicated enforcement unit, the Cyber and Emerging Technologies Unit, with AI-related misconduct among its stated priorities. A year earlier it had already settled charges against two investment firms that claimed AI capabilities they did not have. The signal is unambiguous: the room is being audited.

So are the pitches. Investors who spend under three minutes on an average deck have developed a specific pattern of scrutiny that activates when AI leads and the product does not warrant it. The question stops being "tell me more". It becomes "what else here is overstated".

A client of ours was convinced his company would not be taken seriously without AI at the front. Not because the product was built on it — because he believed the label was entry-level currency with Western investors. He had real traction, a defensible position and a product that solved a specific problem better than anything adjacent to it. Leading with AI would have obscured all of it, and in front of an investor already running a higher prior on scepticism it would have done something worse: made everything else harder to believe.

This is the asymmetry that is rarely named. AI washing is a reputational risk for any founder. For a newcomer it is a structural one, because the credibility buffer that absorbs a recoverable mistake in one room does not exist in the same form in another. The margin for narrative error is not slightly smaller. It is materially smaller, in a way that changes what belongs in the first three slides.