AI is impacting business strategy, longevity, and valuations. So, what are investors looking for when examining a board’s use of AI?
Artificial intelligence is transformative, but we’re still figuring out what it means. It’s changing the trajectory of careers, businesses and entire industries, leaving us all a little uncertain about what’s coming next. Naturally, these questions are front of mind for investors too. How do you pick winners if it’s not clear what the game or the track looks like?
For this week’s article on the impact of AI on boards, Ian Horne met with Christina Tymviou, Talent Lead at YFM Equity Partners, to better understand what investors are expecting from senior leaders.
What Do Investors Want?
AI doesn’t completely rip up the rulebook, but it elevates the importance of one key factor; defensibility. If software can be built more quickly and affordably than ever before, technology might not be the competitive advantage that it once was. Accordingly, investors are zeroing in on businesses that will endure.
Tymviou says this shift is changing the questions that YFM asks management teams, and points to three questions that are now taking priority:
- Do you own proprietary data?
- Are you embedded in customer workflows?
- Does AI strengthen your position, or commoditise it?
“Value is no longer just about code,” says Tymviou. “It’s about how deeply a product is embedded in a customer’s world – their data, their workflows, and the complexities of their industry.”
For those at risk of being displaced, the market can be unforgiving. In February, the Financial Times reported on a selloff in software and services stocks, which saw US companies such as Intuit, Gartner, Workday and AppLovin drop roughly 40% from their start-of-year valuations. Capital-light businesses, often favoured for their ability to scale rapidly, can be more easily disrupted. What else would you expect if there’s a possibility someone can simply recreate your product with AI?
What Matters Most if Products are Replaceable?
If a unique product isn’t the tonic for longevity that it once was, investors need to dig deeper. Tymviou explains that attention should shift towards the people behind the idea.
“Ultimately, when products can be rebuilt quickly, the team becomes the most important factor. When a definable moat can be eroded and there’s no certainty around how a product will evolve, the one thing investors can underwrite is the team behind it.”
“Anyone can build a wrapper around a generic LLM or put together an impressive deck. The teams that stand out are those deeply embedded in their sector – founders with real domain expertise who have lived the customer’s problem. AI cannot replicate that depth of understanding.”
The right mindset is essential too. Tymviou explains that the strongest teams demonstrate honesty, clarity of thinking, and the ability to adapt. “They are passionate, pragmatic, resilient, and open to new ideas,” she adds. On the contrary, burying your head in the sand is a losing strategy, and the same can be said for overselling your AI competence and resilience. “Vague AI claims used to generate excitement. Now they generate scrutiny,” says Tymviou.
Those who overstate their position won’t ‘get away with it’ for long. Funders are increasingly AI-savvy too, and Tymviou explains that the YFM team is continuing to build its internal AI knowledge and capabilities, both operationally and from an investment perspective, supported by a strong network of external experts.
“It’s up to us to ask the right questions up front, and to back the teams who can navigate what’s next,” she adds.
What Else Can Boards Do?
The questions have changed, and in some respects so has the role of the board, in particular those that intend to be a driving force in helping a business navigate AI-driven change. That starts with ensuring AI is treated as a core strategic priority, not a side initiative.
“The focus should be on where AI creates real value for customers, how governance risks are managed, and whether the team has the capability to deliver,” explains Tymviou. “Chairs and Non-Executive Directors are central to this. That requires a level of AI literacy, but not technical depth. Boards need to stay informed and curious.”
Tymviou observes that many experienced non-execs are actively rising to the challenge, often by taking courses, attending industry events and continuing to build their understanding. Many of these people have guided businesses through multiple exits and have deep market knowledge, yet still recognise a need to stay current. The message is clear; if experienced and proven business leaders are still hitting the books, other board members should most likely do the same.
Tymviou warns, however, that literacy alone is not enough.
“The real differentiator is judgement. The ability to challenge assumptions, ask the right questions, and guide teams through ambiguity without undermining them. This quality cannot be learned in a classroom. It is built over time through experience, pattern recognition, and earned trust. It is what separates a board that adds genuine value in uncertain conditions from one that simply monitors from a distance.”
Boards do not need to have all of the answers in-house. In a fast-paced environment, access to external expertise can be a differentiator, and boards that leverage their networks effectively by bringing in specialists, advisors, and real-world operators, are in a better position to validate strategy and avoid blind spots. Tymviou explains that at YFM, a key focus now is to connect portfolio companies with experts who provide both technical insight and practical experience.
“Crucially, boards should encourage experimentation with discipline. The pace of change means not everything will work, but doing nothing is the greater risk.”
To Conclude
AI has introduced opportunity with a side effect of risk and rapid change. Investors know this, and although it doesn’t invalidate the past experience of board members, boards need to stay sharp and relevant in order to steer management teams in the right direction – especially in businesses more easily disrupted by AI. Bluffers, even good ones, can be found out quite quickly by investors.
