The Signal or the Noise? The Impact of AI Claims on Venture Financing Performance

As AI becomes a transformative technology with wide-ranging applications across industries, AIclaims attract growing attention from investors. However, with the increasing prevalence of AIwashing, AI claims may be perceived as cheap talk that may not correspond to startups’substantive AI capabilities. To better understand whether such claims function as signals or noisein venture financing, we analyze a panel of data for 16,713 U.S. non-AI startups from 2010 to2024 and examine the relationship between AI claims, financing performance, and exit outcomes.The results show that non-AI startups making AI claims achieve better financing performance butare less likely to reach successful exits, suggesting that such claims may function as signals infinancing stages while providing limited information about long-term venture quality. Our studycontributes to the economics of AI, venture capital financing, signaling theory and the digitalentrepreneurship literature and has practical implications for startups and VCs.