I've Had 100 Demos and this is Why Most AI RecTech Will Fail

David Morgan January 2026

TL:DR

Most AI start-ups will fail because they lack understand of the target market and they rely on a tired B2B channel sales playbook, under valuing of the power of the industry expert and their human network.

Lack of inhouse specialist industry knowledge will prove to be the main reason some great tech sits on a server and never sees the light of day. Not because it is not great, but because the Founders lacked direct insight and nuance of the market they were targeting.

Context

Based on my observations from recruitment conferences last year, extensive discussions with exhibitors, demos from AI tech providers, and continuous dialogue within my senior industry network, one truth has become painfully clear: the recruitment technology market is reaching a critical point of saturation and scepticism.

Most AI start-ups will fail. 

Some truly "great" tech sits on a server and will never see the light of day. It isn't for lack of brilliance; it is because the Founders lacked the direct insight and nuance of the market they were targeting.

The 2026 Reality Check: A Perfect Storm

The "mountain" start-ups must climb has become significantly steeper. We are witnessing a perfect storm of threats that many founders are ill-equipped to navigate:

• The "Platform Squeeze" from Giants: Large-scale players are no longer sitting on the sidelines. With the launch of LinkedIn RPS+, incumbents are leveraging their massive data moats to bake AI features directly into the tools recruiters already use. If a start-up is merely a "wrapper" for a feature Microsoft can release overnight, it is in immediate danger.

• High Investor Expectations vs. Limited Runway: The "buy anything AI" gold rush is over. Investors now demand immediate evidence of ROI and positive cash flow. Many start-ups are finding their financial runway is dangerously short, running out of cash before they achieve traction because they spent their budget building features the market didn’t actually want.

• The Rise of Bespoke AI: Tech-aware businesses are increasingly rejecting "one-size-fits-all" solutions. Instead, they are leveraging internal expertise to create their own bespoke AI agents, tailored to their specific business needs and data sovereignty. To compete with a "homegrown" solution, a start-up's value must be undeniable and deeply nuanced.

• Talent-Tech Divide: Many brilliant tech founders emerge from strong engineering or product backgrounds. They understand algorithms, scalability, and user interfaces inside out. What they often lack, however, is the visceral, battle-tested understanding of the human-centric, often messy, realities of the recruitment industry.

Where True Fractional Value is Added

This is where a fractional leader, with hands-on industry experience, becomes invaluable. They aren't just consultants; they are embedded, strategic partners. Their impact is profound because they provide the credibility and deep understanding needed to differentiate a product against both global giants and in-house builds.

The value proposition of a fractional advisor goes far beyond general strategy. They focus on the high-impact areas where recruitment tech SMEs typically stumble:

1. Translating Pain into Solutions: Every tech company aims to solve a problem. But is it a real problem, or a perceived one? An experienced recruitment leader can articulate the industry's deepest pain points with precision, the operational inefficiencies that truly cripple teams, or the regulatory headaches unique to the UK market. This ensures your platform moves from a "nice-to-have" to a "must-have."

2. Unlocking Powerful Networks: True credibility in recruitment is built on trust. A senior fractional advisor brings an established, high-value network of decision makers. They can open doors that would take a start-up years to crack, providing warm introductions and the critical validation needed to secure pilot contracts in a sceptical market.

3. Differentiating Credibility: In a market flooded with AI claims, credibility is currency. When an industry veteran champions your platform, it lends an unparalleled level of authority. It tells the market: "This isn't just another shiny object; it’s built by people who get it."

4. Navigating the Ecosystem: The recruitment industry isn't monolithic. It's a complex web of agencies, in-house TA teams, RPO providers and Candidate experience. An experienced advisor has lived and breathed this environment, possessing the innate understanding of its nuances and political currents.

The Strategic Imperative

The current economic climate demands lean operations and strategic precision. Fractional leaders offer exactly that: senior expertise without the overheads of a full-time executive.

For recruitment tech start-ups and SMEs in the UK battling for differentiation against the likes of LinkedIn and bespoke in-house builds, bringing in this level of industry-proven leadership isn't a luxury – it’s a survival strategy.

Speak to me if you want to find out more.