ValuAdder Business Valuation Blog

Artificial Intelligence (AI) has become the hottest buzzword in technology marketing. Unfortunately, in the niche of business valuation software, many vendors are guilty of AI washing – exaggerating or fabricating AI capabilities to attract customers and investors. This practice misleads financial professionals and undermines trust in critical tools.

What is AI Washing?

AI washing refers to the practice of labeling simple automation or rule-based processes as “AI-powered” without any genuine machine learning or advanced analytics behind them. It’s marketing hype designed to capitalize on the popularity of AI.

Why Business Valuation Vendors Engage in AI Washing

  • Competitive Pressure: Vendors want to appear cutting-edge in a crowded market.
  • Investor Appeal: Claiming AI capabilities boosts valuations and funding prospects.
  • Customer Attraction: CPAs and advisors may be swayed by promises of faster, smarter valuations.

Blatant Examples

Promising vendor No 1:

  • Claim: “AI-powered deal sourcing and valuation.”
  • Reality: Database search and analytics with no disclosed ML models.
  • Transparency: No explanation of algorithms or training data.

Vendor No 2:

  • Claim: “AI-driven business valuation software.”
  • Reality: Rule-based templates applying standard multiples.
  • Transparency: No evidence of machine learning or validation studies.

Aspiring vendor No 3:

  • Claim: “AI-powered valuations with speed and precision.”
  • Reality: Automated access to comps databases and benchmarking tools.
  • Transparency: No disclosure of actual AI techniques.

Why These Claims Fall Short

  • No Scale: Vendors lack the data and infrastructure to train ML models at scale.
  • No Disclosure: None provide technical details, compliance certifications, or validation benchmarks.
  • No Compliance: Unlike ValuAdder (desktop-based, PCI DSS compliant), SaaS vendors avoid explicit security standards.

Risks of AI Washing

  • False Confidence: Customers may believe valuations are more accurate than they are.
  • Compliance Gaps: Black-box claims cannot be defended in audits or litigation.
  • Reputational Damage: Advisors relying on AI-washed tools risk credibility with clients.

The Takeaway

AI washing in business valuation software is rampant. Overzealous vendors market themselves as AI-powered but fail to disclose any real machine learning capabilities. Financial professionals should treat these claims with skepticism, demand transparency, and prioritize tools that emphasize accuracy, compliance, and control over marketing hype.

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