“We love your traction, but can you add more AI?”
I’ve heard this question more times than I can count in the last 18 months. It’s the venture capital equivalent of a doctor telling you to take two aspirin and call them in the morning. It’s a lazy, catch-all piece of advice that signals a fundamental misunderstanding of what it takes to build a generational AI company.
Let’s be clear: I’m not an AI-hater. Far from it. I’ve put my money where my mouth is, with early investments in companies like Anthropic, OpenAI, Scale AI, and Hugging Face. I’ve seen firsthand the transformative power of this technology. But I’ve also seen a gold rush mentality take over Silicon Valley, with VCs who were chasing crypto last year now rebranding as “AI experts.”
These are the VCs you need to watch out for. The ones who can’t tell the difference between a real AI innovation and a fancy wrapper around a GPT-4 API call. The ones who will push you to “add more AI” without understanding your product, your customers, or your market. These are the bad VCs, and they can kill your startup before it even has a chance to get off the ground.
I’ve had two successful exits of my own—RemoteTeam acquired by Gusto and MovieLaLa acquired by Gfycat—and I’ve learned a lot about dealing with VCs from both sides of the table. I’ve seen the good, the bad, and the ugly. And I’m here to tell you how to spot a bad VC during your AI due diligence, so you can avoid the mistakes that have killed so many promising startups.
The ‘Add More AI’ Fallacy
It’s a simple phrase, but it reveals so much. When a VC tells you to “add more AI,” what they’re really saying is, “I don’t understand your business, but I know that AI is hot right now, so if you sprinkle some of that magic dust on it, I can sell it to my partners.”
This is a huge red flag. A good VC will take the time to understand your product, your customers, and your market. They’ll ask you tough questions. They’ll challenge your assumptions. They won’t just give you a generic piece of advice that could apply to any company.
I remember one pitch where a founder was building a fantastic vertical SaaS product for the construction industry. They had deep domain expertise, a great product, and a clear path to profitability. But the VC they were pitching to was obsessed with AI. “How can you use generative AI to create building plans?” he asked. The founder tried to explain that this was a solution in search of a problem, that construction companies have very specific workflows and that auto-generating plans wasn't the bottleneck. The VC just didn't get it. He passed on the deal, and that company went on to raise a massive round from a firm that actually understood their business.
This is the danger of the “add more AI” fallacy. It’s a distraction. It can lead you down a rabbit hole of building features that nobody wants, just to appease a VC who is chasing the latest trend. A good investor will help you focus, not distract you with shiny objects.
The Technical Dunce
Another tell-tale sign of a bad VC is a complete lack of technical depth. They might throw around buzzwords like “LLM,” “transformer architecture,” and “RAG,” but when you press them for details, you get blank stares.
I was once in a meeting with a VC who claimed to be an AI expert. I was pitching an AI-powered ed-tech company. He asked me, “So, are you using the big data to do the machine learning?” I almost fell out of my chair. It was such a meaningless, buzzword-laden question that it told me everything I needed to know about his level of understanding.
Good VCs, especially those investing in AI, don’t need to be PhDs in machine learning. But they do need to have a fundamental grasp of the technology. They need to understand the difference between a model that is truly innovative and one that is just a thin wrapper around an existing API. They need to be able to ask intelligent questions that go beyond the surface-level hype.
Here’s a pro-tip: ask them about their own tech stack. What tools are they using to analyze deals? How are they using AI to improve their own workflows? If they can’t give you a coherent answer, that’s a major red flag. It shows that they’re not really committed to the AI revolution; they’re just tourists.
Don't be afraid to get technical in your pitch. A good VC will appreciate it. A bad one will be exposed.
The Zombie Pivot and the Market Size Mirage
One of the most dangerous things a bad VC can do is push you into a “zombie pivot.” This is when you abandon a solid, albeit less sexy, business model to chase a hot trend, only to find yourself in a dead end. You’re not dead, but you’re not really alive either. You’re a zombie startup, shambling along with no real purpose or direction.
I’ve seen this happen time and time again with AI. A founder has a great niche product, but a VC convinces them that the real money is in building a foundational model, or a generalized AI assistant. The founder, eager to please their investors and get that next round of funding, agrees to the pivot. They spend months, or even years, trying to build something that is completely outside of their core competency. In the end, they have nothing to show for it but a burned-out team and a depleted bank account.
A key driver of this is a complete misinterpretation of market size. Bad VCs see a headline that says “The AI market will be worth $2 trillion by 2030” and they start salivating. They don’t bother to dig deeper and understand the nuances of that market. They don’t ask the hard questions: Who are the real customers? What are the specific use cases? How much are people willing to pay?
They just see a big number and they want a piece of it. So they push you to pivot into a market that you have no business being in. They’ll tell you to go after the enterprise market, even if your product is built for small businesses. They’ll tell you to build a horizontal platform, even if your strength is in a specific vertical.
Good VCs, on the other hand, understand that market size is not just about a big number. It’s about finding a niche that you can dominate. It’s about understanding the specific pain points of a specific set of customers and building a product that solves those pain points better than anyone else. They will help you to focus and to own your market, not to chase after every shiny new object.
The Exit Strategy Fantasy
This obsession with massive, undefined markets leads directly to another sin of the bad VC: the exit strategy fantasy. They’re not interested in building a sustainable, profitable business. They’re playing a numbers game. They need you to be a 100x return, a “fund returner,” otherwise you’re a failure in their eyes.
This pressure leads to terrible strategic decisions. They’ll push you to burn cash at an unsustainable rate to achieve hyper-growth, even if the unit economics don’t make sense. They’ll tell you to ignore acquisition offers that could provide a great return for you and your team because they’re holding out for a multi-billion dollar IPO.
I’ve seen this firsthand. A founder I know had a solid $100 million acquisition offer from a major tech company. It would have been life-changing for him and his employees. But his lead VC, who had just raised a new fund and needed a big win to show his LPs, vetoed the deal. He told the founder, “We’re not here to hit singles. We’re swinging for the fences.” Two years later, the market had turned, the company ran out of money, and they had to shut it down. Everyone got nothing.
My own exits weren’t billion-dollar IPOs. RemoteTeam was acquired by Gusto, and MovieLaLa was acquired by Gfycat. These were fantastic outcomes. We built great products that were valued by larger companies with strategic needs. We provided a great return for our investors and, just as importantly, for our teams. That’s a win. A bad VC would have called it a single.
A good VC understands that there are many paths to a successful exit. They will work with you to understand your personal goals and the goals of your team. They will help you to build a business that has options, whether that’s an IPO, a strategic acquisition, or even just staying private and profitable. They won’t force you into a one-size-fits-all model that serves their interests at the expense of yours.
So, How Do You Find the Good Ones?
I’ve spent a lot of time talking about what not to look for. But how do you spot a good VC? What are the green flags that tell you you’ve found a real partner, not just a source of capital?
It’s not always easy, but here are a few things I look for:
They ask better questions. A good VC’s questions will make you think. They won’t be generic gotchas or buzzword bingo. They’ll be specific to your business, your market, and your product. They’ll show that they’ve done their homework and are genuinely trying to understand what you’re building. A great question I was once asked was, “What is a core belief you hold about this market that most people would disagree with?” That’s a question that gets to the heart of your vision.
They have a point of view. A good VC isn’t a passive observer. They have a thesis about the future of your market. They have opinions. They might not always be right, but they’ve thought deeply about the space and can engage with you in a real debate. They should challenge you, and you should feel comfortable challenging them back.
They talk about people, not just numbers. When you talk to a good VC, they’ll be just as interested in your team as they are in your metrics. They’ll want to know about the culture you’re building, the people you’re hiring, and the challenges you’re facing as a leader. They understand that a great company is built by great people.
They are transparent about their process and their fund. They should be able to clearly articulate their decision-making process, their fund size, their target ownership, and how they think about portfolio construction. If they are cagey about these details, it’s a sign they might not be straightforward in other areas either.
They give you helpful feedback, even if they pass. A VC’s job is to say no most of the time. But a good VC will say no in a way that is helpful. They’ll give you specific, actionable feedback on why they’re passing and what you could do to improve your pitch. I always appreciate a thoughtful “no” more than a string of ghosting emails.
Finding the right VC is a lot like finding a co-founder. It’s a long-term relationship. You need to find someone you trust, someone you respect, and someone who is going to be in the trenches with you when things get tough. Don’t just take the first check that’s offered to you. Do your own due diligence. Talk to other founders in their portfolio. Make sure you’re getting into business with someone who is going to be a true partner, not just a passenger on your journey.
Choose Your Partners Wisely
The AI gold rush is creating a lot of noise, and it’s attracting a lot of prospectors who are just looking to get rich quick. These are the bad VCs. They don’t care about your vision, your product, or your team. They just care about the trend.
But there are good VCs out there. The ones who will take the time to understand your business, who will challenge you to be better, and who will be true partners in your success. Your job as a founder is to tell the difference.
Don’t be seduced by a big check from a brand-name firm. Don’t let anyone push you to “add more AI” just for the sake of it. Build a real business that solves a real problem. The right investors will find you. And when they do, you’ll be building on a foundation of solid rock, not shifting sand.
Frequently Asked Questions
How do I measure success with this approach?
Pick one or two metrics that directly tie to your goal and track them weekly. Vanity metrics like page views or follower counts rarely matter. Focus on metrics that reflect real engagement or revenue impact.
What tools do I need to get started?
Start with the basics. You don't need expensive software or fancy tools. A spreadsheet, a note-taking app, and direct access to your customers will get you further than any enterprise platform. Add tools only when you hit a specific bottleneck.
How long does it take to spot a bad vc during ai due diligence.?
The timeline varies depending on your starting point and resources. For most founders, expect 2-4 weeks for initial setup and 2-3 months to see meaningful results. I've seen teams move faster when they focus on one thing at a time rather than trying to do everything at once.
Do I need technical skills to spot a bad vc during ai due diligence.?
Not necessarily. While technical understanding helps, the most important skills are clear thinking and the ability to break problems into smaller pieces. Many successful founders I've invested in started with zero technical background and either learned enough to be dangerous or found the right technical partner.