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Builder.ai, once valued at $1.5 billion and hailed as a disruptor in the world of no-code software, is entering insolvency proceedings, bringing its high-flying story to a crashing halt. The company admitted on LinkedIn that it had “been unable to recover from historic challenges and past decisions” and would appoint administrators to manage its affairs.
The dramatic downfall follows widespread reports that Builder.ai’s AI-powered app development tools were, in reality, driven by hundreds of human engineers behind the scenes.
What Builder.ai advertised vs. reality
Builder.ai, originally called Engineer.ai, promised to automate app building with artificial intelligence. The company’s digital assistant “Natasha” was marketed as a tool that could write code based on user input; instead, the real work was done by about 700 engineers, mostly based in India. Their output was presented to customers as AI-generated.
The numbers didn’t add up
When Manpreet Ratia took over as CEO earlier this year, he discovered the company had inflated its 2024 revenue projections by 300%. While executives claimed $220 million in sales, an independent audit revealed the actual figure was closer to $50 million.
Viola Credit, one of its lenders, seized $37 million from Builder.ai’s accounts after the deception came to light. Left with $5 million only in restricted funds, the company could no longer operate across its markets in the UK, US, and India. Staff went unpaid, and nearly 1,000 employees were laid off.
Builder.ai’s financial woes didn’t end there. Reports emerged that it may have engaged in suspicious transactions with Indian firm VerSe Innovation. According to Bloomberg, the two companies allegedly billed each other for services not always rendered, a tactic known as “round-tripping” to inflate revenue between 2021 and 2024.
VerSe said in a statement that the claims were “factually incorrect and baseless,” insisting all payments were legitimate. “Any insinuation that VerSe Innovation colluded with Builder.ai to inflate revenues, engaged in reciprocal billing without corresponding services, or manipulated invoicing practices to conceal any arrangement or payments were intentionally interspersed in timing and amount of the invoices to avoid suspicion is entirely false, defamatory, and irresponsible.”
Bloomberg reported that, in an audit of VerSe, Deloitte raised concerns over VerSe’s internal controls and financial practices. These concerns were documented by VerSe in its financial report for the year ending in March 2024.
Federal scrutiny and investor losses
With bankruptcy proceedings underway, Builder.ai is the latest example of what many are calling “AI washing,” where companies exaggerate or fake AI capabilities to attract funding.
Now under investigation by US prosecutors, Builder.ai has been ordered to hand over financial statements and customer records. Reports indicate the company owes Amazon $85 million and Microsoft $30 million in unpaid cloud computing services.
Microsoft, a high-profile backer, had once touted Builder.ai as a partner in its AI ambitions. “We see Builder.ai creating an entirely new category that empowers everyone to be a developer and our new, deeper collaboration fuelled by Azure AI will bring the combined power of both companies to businesses around the world,” said Microsoft in 2023.
Now Microsoft faces millions in potential losses.
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