Venture capital investment in artificial intelligence reached a 10-quarter high in early 2025, with €108.3 billion raised in the first quarter, including €44.6 billion for AI startups. But alongside this surge, investors are showing growing scepticism about “AI-washing”—the exaggeration of AI capabilities to secure funding.
Industry experts say the era when any AI-branded startup could attract capital is ending. Investors now demand working demos, proven customers and clear evidence of value. Forecasts from Gartner and MIT warn that many AI projects will be cancelled or fail at pilot stage, reinforcing calls for substance over hype.
Gradient Labs, an AI customer service platform for regulated industries, recently closed an €11.1 million Series A by focusing on reliability and accuracy. The company emphasised product excellence and domain expertise, steering clear of trends without substance. Its platform, which outperforms human agents in compliance-heavy environments, convinced investors that it could deliver lasting impact.
This contrasts with earlier funding cycles when being “AI-native” was enough to win backing. Startups are now expected to demonstrate resilience, anticipate rapid model developments, and build strong investor relationships before raising capital.
Global appetite for AI remains strong. US robotics startup Figure raised over $1 billion in a Series C round, reaching a $39 billion valuation, with support from Nvidia and Intel Capital. In Israel, Glilot Capital launched a $500 million fund for early-stage AI and cybersecurity.
Enterprise investment is also accelerating. Gartner projects global AI spending will surpass $2 trillion by 2026, driven by demand for data centres and AI-optimised hardware. In the UK, multi-billion-pound commitments from major technology firms reflect ambitions to become a hub for responsible AI development.
Even large-scale funds are recalibrating. SoftBank Vision Fund has shifted from broad startup bets to capital-intensive foundational AI projects, including a $500 billion US-based data centre collaboration with OpenAI. The move signals a shift towards vertically integrated AI ecosystems that blend infrastructure and applications.
Despite continued enthusiasm, the climate now rewards authenticity and execution. “The current climate favours clear problem-solving and proven impact over superficial claims,” said the CEO of Gradient Labs.
For the UK, the opportunity lies in combining scalable, trustworthy solutions with robust infrastructure and skills. By fostering responsible innovation and building long-term investor confidence, the country can strengthen its position in the global AI economy.
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