VCs are growing wary of ‘AI-washing’ – but real innovation is still winning investors

European venture capital investment surged in the first quarter of 2025, reaching its highest level in over two years, largely fueled by significant investment in artificial intelligence. This influx of capital, with a total of €108.3 billion invested, highlights the continued dynamism and attractiveness of the technology sector within the European Union. The figures indicate that European businesses are well-positioned to compete on a global scale, particularly in sectors that will define the future. A substantial portion of this investment, totaling over €44.6 billion, was directed towards AI-related startups. This represents a significant allocation of funds towards emerging technologies, encompassing areas like machine learning, natural language processing, and robotics. The surge underscores the strategic importance the EU places on becoming a leader in the development and deployment of AI, supporting both innovation and digital sovereignty. However, investors are increasingly vigilant, exhibiting growing skepticism towards what’s being called “AI-washing,” where companies falsely or misleadingly present their capabilities. This development encourages a focus on genuine AI innovation and practical applications, impacting startups aiming to integrate AI into their operations. European businesses and policymakers should be mindful to not get swept up in marketing tactics and ensure that funds are directed to solid, viable innovations. This trend suggests a maturation of the market, pushing for real-world applications of AI. EU regulations such as the AI Act, currently under discussion, aim to establish ethical guidelines and promote transparency in AI development. This framework supports the demand for genuine AI solutions, fostering a sustainable and trustworthy European digital landscape.