Duncan Davidson from Bullpen Capital warns against the perils of ‘A.I. washing’ and speculative investments based on buzzwords

**[Title]**: The Dangers of AI Washing: How VCs Can Identify Real vs. Fake AI Pitches | CNBC

In this exclusive interview with Duncan Davidson, partner at Bullpen Capital, on CNBC’s Power Lunch, we delve into the dangers of ‘AI washing’ and uncover effective strategies for venture capitalists (VCs) to distinguish genuine AI ventures from deceptive ones.

AI washing has become a prevalent issue in the tech industry, with companies misrepresenting their products or services as AI-driven, when in reality, they are merely superficial. But how can VCs separate the wheat from the chaff and make informed investment decisions?

Duncan Davidson explains that asking the right questions is key. Rather than focusing solely on the technology, VCs should assess whether a company is building a real, sustainable business. To elaborate, he highlights the significance of platform shifts, such as the shift from client-server to cloud computing. By evaluating the potential of an AI-based CRM to outperform industry giants like Salesforce, VCs can gauge the enterprise-readiness of a startup.

Additionally, Duncan emphasizes the importance of distinguishing between lightweight wrappers around ChatGPT and robust, scalable platforms capable of integrating with enterprise systems. Instead of investing in the core ChatGPT technology itself, which requires substantial capital, VCs should consider investing in innovative applications or solutions built on top of established AI platforms like Amazon and Azure.

Ultimately, Bullpen Capital’s approach is to leverage these existing platforms and compete at a higher level, rather than directly competing with industry giants like Google, Microsoft, or OpenAI.

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**[Keywords/Tags]**: CNBC, Business, News, Finance, Stock Market, AI Washing, VC, Tech Industry, ChatGPT, Salesforce, Enterprise-Ready, Platform Shifts, Innovation, Investment Strategies


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00:00 – **CNBC Anchor**: “The critical question you have to ask yourself is sort of like just before the I.T. bubble. How do VCs know when the tech is real? Duncan Davidson joins us. What’s the first question you ask in trying to separate the real from the science fiction?”

00:12 – **Duncan Davidson**: “We don’t answer that question. That question is a trap. You heard the person say it’s easy to wrap around ChatGPT and throw a business out. Well, if it’s that easy, there’s going to be 20 more doing it before you know it. You don’t want to go into that game. Instead, we ask a different question: Are you building a real business? I can tell you about how we look into that if you like.”

00:35 – **CNBC Anchor**: “Go ahead.”

00:36 – **Duncan Davidson**: “Well, first of all, there’s a situation that always happens called a platform shift. We went from client-server to cloud. Client-server winners got smoked by the cloud – people like The question we’re asking is, will an AI-based CRM smoke Salesforce? It may seem improbable because they’re so big and strong. That’s number one. We look at whether it’s enterprise-ready. A lot of these wrappers around ChatGPT that are getting spun up are no way ready to go into enterprise. They’re too lightweight. Are you trying to replace enterprise, and do you have a platform that can go in there? If you understand what I’m saying, we don’t look at the core ChatGPT. That’s not the business we want to invest in. That takes so much capital right now. It’s out of the VC range. It’s like when Amazon and Azure broke the cloud platform; it was investing in things on top of it.”

01:29 – **CNBC Anchor**: “You would not be investing in the same kinds of things that Google is investing in, that Microsoft is investing in. That’s out of your scope. You’ll invest in things that are more bite-sized or digestible.”

01:37 – **Duncan Davidson**: “Or is the analogy the Uber to the iPhone? We’re not going to try to compete with Google, Microsoft, and OpenAI. We’re going to use that as a platform and compete on a higher level.”

*This transcript has been edited for clarity and brevity.*

Duncan Davidson, partner at Bullpen Capital, joins ‘Power Lunch’ to discuss the dangers of ‘AI washing’ and how VCs should identify real vs. fake A.I. pitches. For access to live and exclusive video from CNBC subscribe to CNBC PRO: 

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