Written by Yael Benjamin
The startup ecosystem is excited about the transformative promise of generative AI, but a new report from my research firm, Startup Snapshot, reveals that this excitement may come at a price. .
The report, Beyond the Buzz: The Real Impact of GenAI on Startup Building on, takes a candid look at how startups are leveraging AI and highlights the opportunities, risks, and challenges associated with this revolution. . The findings, based on a survey of more than 220 founders and 85 GenAI experts, highlight the urgent need for startups to balance innovation and governance.
Unrealized potential and missing AI policies
GenAI’s promise to accelerate product development and reduce time to market has captivated startup founders, with 66% of executives calling it a game changer.
However, the situation resembles the Wild West, with more than half (52%) of startups reporting that employees select and use GenAI tools on their own without organizational oversight. I am. While this voluntary adoption reflects the entrepreneurial spirit of agility, initiative, and rapid problem-solving, it also exposes startups to significant risks such as security vulnerabilities and misuse of AI tools. Masu.
“Startups are taking advantage of the immense potential of GenAI, but without clear policies, they risk undermining their innovations,” said Netanela Treistman, Partner at Arnon Tadmor Levy. speaks. “It is important to take a strategic, top-down approach and establish protocols for the use of GenAI tools from day one. The current agile model, where employees choose their own tools, may work in the short term. However, as organizations grow, they can pose significant challenges.”
To fully leverage the transformative power of GenAI, startups must balance agility and governance to ensure their innovation efforts are sustainable and secure.
Employees unprepared for the reality of GenAI
Employee readiness remains one of the biggest hurdles in GenAI adoption. According to the report, 55% of startups have less than half of their employees trained in GenAI, and only 15% of executives are investing in upskilling their teams.
This skills gap forces startups to rely on external AI expertise and compete for a limited pool of top talent with larger, better-funded technology companies. While this strategy may address immediate needs, it risks creating a knowledge gap within the organization and compromising its ability to sustainably innovate over the long term.
Raphael Ouzan, founder of A.Team, highlights the challenge: “Making the leap from prototype to production is more than just a technical hurdle, it’s also a team challenge.Startups are finding that the key to AI-driven innovation is not just adopting the technology, but building enterprise-ready GenAI applications. We’re starting to realize that it’s about finding and developing people with proven experience in development.”
To remain competitive, startups must go beyond short-term fixes and prioritize internal talent development. Investing in employee training and upskilling helps build a foundation of expertise that supports innovation and resilience as your company scales.
Excessive hype and misaligned investments
This report reveals a troubling trend. The hype surrounding GenAI has led some startups to exaggerate their AI capabilities to attract investor attention. More than 25% of founders surveyed admitted to exaggerating the use of GenAI in their pitches. While this strategy has increased investor interest, with 76% of executives reporting increased enthusiasm from investors, it has also led to disappointing expectations and bad investments.
Despite the excitement, many investors are rushing ahead without fully identifying the risks. Only 7% of founders reported being asked to present their AI policy during funding discussions. This lack of scrutiny stems from a knowledge gap. Many investors get caught up in the GenAI buzz, lack the expertise to identify potential pitfalls, and fail to ask important questions during due diligence.
The findings highlight the need for investors to place greater emphasis on governance and risk management when investing in GenAI, ensuring that enthusiasm does not come at the expense of sustainable growth.
Yael Benjamin is the founder of Startup Snapshot, a research firm 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, covering key topics such as fundraising, founder mental health, investor relations, compensation, and new technologies. Covers entrepreneurial topics.
Illustration: Dom Guzman
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