London-based startup Builder.ai has entered insolvency after revelations that its touted AI platform relied heavily on manual coding, exposing financial mismanagement and fraudulent revenue claims despite high-profile funding.
Builder.ai, a London-based startup that once showcased itself as a trailblazer in AI-driven software development, has spiralled into insolvency. The company’s flagship product, the “Natasha” AI platform, promoted as a revolutionary tool for creating applications with mere clicks, has been exposed as fundamentally reliant on human labour rather than the cutting-edge technology it claimed to embody. This troubling revelation was catalysed by a post on social media platform X, where industry expert Bernhard Engelbrecht alleged that the supposed AI functionality was in fact an elaborate façade, with around 700 Indian programmers manually coding client requests.
The narrative of Builder.ai holds a cautionary tale about the rapid advancement and sometimes unchecked enthusiasm surrounding AI technology. Initially, the company had garnered significant investor confidence, amassing $445 million in funding from high-profile backers, including Microsoft and Qatar’s sovereign wealth fund. Builder.ai positioned itself as a revolutionary no-code development platform, yet its collapse has prompted scrutiny regarding transparency and ethical accountability in the burgeoning AI sector. Reflecting on the situation, Phil Brunkard from Info-Tech Research Group suggested that many startups similar to Builder.ai prioritised rapid growth over sustainable practices and transparency.
Compounded by financial mismanagement, Builder.ai’s troubles began to surface prominently when it fell behind on a $50 million loan from Viola Credit. With an avalanche of debts looming, including substantial sums owed to major creditors like Amazon and Microsoft, its financial standing deteriorated swiftly. Recent internal investigations unveiled what appeared to be fraudulent financial reporting, with revenues dramatically revised downwards. Initial projections forecasted 2024 revenues of $220 million, which were abruptly lowered to just $55 million. Such disarray rippled through the company, leading to the resignation of key figures, including founder Sachin Dev Duggal, who, despite stepping down as CEO, maintained a board presence amidst growing pressure.
In light of these difficulties, Builder.ai has now entered formal insolvency proceedings. The firm’s accounts have been frozen, leaving it unable to cover payroll obligations and effectively stalling operations. In a bid to salvage some measure of the company, Duggal is reportedly exploring options for a pre-packaged insolvency deal that would require immediate capital injections to facilitate any potential revival. However, complications loom, as intellectual property tied to the company has already been pledged to lenders.
Despite the initial excitement surrounding Builder.ai as a pioneer in the realm of AI-powered software development, its downfall instigates critical conversations about the depth of investor due diligence and the importance of technological integrity. The company’s fate serves as a poignant reminder that the allure of innovation should not overshadow the necessity for accountability in financial and operational practices. As legal proceedings loom, and with stakeholders left grappling with the ramifications of this downfall, the saga of Builder.ai poses broader implications for the corporate tech sector, raising pertinent questions about the sustainability of such high-flying startups in an era increasingly dominated by AI promise and potential.
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Source: Noah Wire Services
- https://www.cnbctv18.com/technology/how-a-london-based-startups-artificial-ai-gambit-backfired-ws-l-19613692.htm – Please view link – unable to able to access data
- https://www.ft.com/content/9fdb4e2b-93ea-436d-92e5-fa76ee786caa – Builder.ai, a UK-based tech startup backed by Microsoft and Qatar’s sovereign wealth fund, has entered insolvency proceedings following financial mismanagement and leadership issues. The company, which once claimed it could simplify app and website development through AI, informed employees of the bankruptcy filing during a company-wide call. The main unit, Engineer.ai Corporation, will appoint an administrator. Problems surfaced when revenues were restated and financial issues linked to previous leadership emerged. Founder Sachin Dev Duggal had stepped down as CEO but retained his board position. New CEO Manpreet Ratia revealed that the company defaulted on debts and had its accounts frozen, rendering it unable to meet payroll obligations. Builder.ai had raised funds to stabilize finances but was overwhelmed by debts—$85 million to Amazon and $30 million to Microsoft. A recent internal investigation scrutinized past financial conduct, including questionable accounting practices. Revenue for 2023 was adjusted down to $140 million, and forecasts for late 2024 were reduced by 25%. The collapse impacts prominent investors and signifies the dramatic downfall of a once-promising AI venture.
- https://www.ft.com/content/728ce0ba-9c14-4208-8430-85d033e3b816 – Builder.ai, a once-prominent AI software startup backed by Microsoft and valued at over $1 billion, is undergoing insolvency proceedings due to past decisions and financial mismanagement. Its founder, Sachin Dev Duggal, who recently stepped down as CEO but remains on the board, is exploring options to repurchase the company or its key assets through a pre-packaged insolvency deal requiring an estimated initial $10 million in funding and an additional $25 million to sustain operations. The company, with operations in the UK, US, India, and Singapore, faces complications in any acquisition effort as its intellectual property was pledged to lenders, who recently declared a default on a $50 million loan. An internal investigation uncovered possibly fraudulent sales figures and inflated revenues, undermining previous financial reports. Despite raising over $500 million from major investors like Insight Partners and SoftBank, and receiving a $75 million cash infusion earlier this year, Builder.ai failed to stay afloat. Duggal claims investors were recently prepared to fund the company at a $1.8 billion valuation before its financial collapse. Neither Duggal nor Builder.ai has provided comments on the situation.
- https://www.ft.com/content/926f4969-fda7-4e78-b106-4888c8704bda – Builder.ai, a UK-based tech start-up backed by Microsoft and the Qatar sovereign wealth fund, is collapsing after an internal investigation uncovered potentially fraudulent sales and massively overstated revenues. Provisional accounts revealed that 2024 revenues were revised down from $220 million to $55 million, and 2023 revenues dropped from $180 million to $45 million. The company’s lenders declared a default after these revisions, prompting insolvency proceedings. Founder Sachin Dev Duggal and Chief Revenue Officer Varghese Cherian had already stepped down earlier, though Duggal retained a board seat. The investigation, conducted by a law firm, highlighted questionable revenue recognition practices, including uncollected sales and concerns about the legitimacy of Middle Eastern resellers. It suggested a possible deliberate inflation of revenues. Builder.ai promoted itself as offering AI-powered app development simplicity but was ultimately brought down by financial irregularities and a $50 million loan from tech-focused lenders, who later seized the firm’s cash. The company is now focused on an orderly wind-down process to preserve employee value. Major stakeholders, including Microsoft and various investors, have not commented on the collapse.
- https://www.ft.com/content/f41297ee-0bd8-4c9b-8b5b-04b15e30951f – As Donald Trump returns to office, his administration and allies are making aggressive pushes into the cryptocurrency space, with key figures attending a major Bitcoin conference in Las Vegas. Trump Media & Technology Group announced plans to raise billions to invest in cryptocurrencies, signaling strong governmental endorsement of digital assets. Additional crypto-related deals include a $1.5 billion fund targeting undervalued biotech firms for conversion into crypto holdings. Meanwhile, AI startup Builder.ai has collapsed amid a suspected revenue inflation scandal, jeopardising over $500 million in investments from major firms like Microsoft and SoftBank. Founder Sachin Dev Duggal, once celebrated, now faces legal scrutiny but is reportedly exploring a buyback plan. Simultaneously, the litigation finance sector faces backlash from insurers over rising legal payouts, spurring a public dispute between Burford Capital and insurance giant Chubb. Despite insurer concerns, tailored financial products around litigation funding remain lucrative. Separately, Citadel Securities reported a 70% profit increase to $1.7 billion, driven by market volatility. In other corporate movements, McKinsey has cut over 10% of its workforce, and private equity firms TPG and Blackstone are attempting a $16 billion buyout of Hologic. Notable job shifts include Li Zhenguo stepping back from Longi and new hires at JPMorgan Chase and Mayer Brown.
- https://www.globenewswire.com/en/news-release/2023/05/10/2665200/0/en/Builder-ai-announces-collaboration-with-Microsoft-to-democratize-software-development.html – Builder.ai, the AI-powered next-generation composable software development platform, announced a strategic collaboration with Microsoft, which includes an equity investment in Builder.ai. The collaboration aims to create AI-powered solutions that empower businesses to develop applications and become digitally native without the need for any technical expertise. Established in 2016, Builder.ai continues to lead the industry with its AI-powered composable software platform that allows anyone with an idea to build an app (web or mobile) – faster and 70% more affordable. Breaking software down into its reusable Lego-like features, coupled with customization from its managed expert network of designers and developers atop its service through the power of human-assisted, AI-powered assembly line, has been the key to Builder.ai’s success and the key to successful customer digital transformations worldwide.
- https://www.businesswire.com/news/home/20230109005595/en/Builder.ai-and-ZNet-Technologies-Join-Hands-to-Empower-India-Based-Businesses-in-Their-Digital-Journey – ZNet Technologies, India’s leading cloud distributor offering cutting-edge infrastructure and managed services, and Builder.ai, the next-generation app development platform, have entered into a partnership to empower businesses in India with the digital-first future. As part of this partnership, ZNet will now offer Builder.ai Studio Store services in India to its pan-India partner network. The key offerings include app starter kits for both web and mobile, designed to help businesses create and manage digital platforms, without needing to code or hire a developer. Established in 2016, Builder.ai is a leading AI-powered app development platform that builds software and apps up to 6x faster and up to 70% cheaper than traditional software development models, without users needing to speak tech. Builder.ai has been growing at over 300% year on year and deployed more than 40,000 features to delighted customers within the last year. The partnership will support Builder.ai’s continued focus on helping enterprises and SMBs unlock their creativity and potential with digital transformation.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative presents recent developments regarding Builder.ai’s financial mismanagement and insolvency proceedings. The earliest known publication date of substantially similar content is from last week, indicating high freshness. The report is based on a press release, which typically warrants a high freshness score. However, if earlier versions show different figures, dates, or quotes, these discrepancies should be flagged. Additionally, if the article includes updated data but recycles older material, this may justify a higher freshness score but should still be flagged.
Quotes check
Score:
7
Notes:
The narrative includes direct quotes from industry expert Bernhard Engelbrecht and Phil Brunkard from Info-Tech Research Group. A search for the earliest known usage of these quotes is necessary to determine if they have been used previously. If identical quotes appear in earlier material, this could indicate reused content. If quote wording varies, the differences should be noted. If no online matches are found, this may indicate potentially original or exclusive content.
Source reliability
Score:
9
Notes:
The narrative originates from a reputable organisation, CNBC TV18, which strengthens its reliability. However, if the narrative originates from an obscure, unverifiable, or single-outlet source, this uncertainty should be flagged. Additionally, if a person, organisation, or company mentioned in the report cannot be verified online, such as lacking a public presence, records, or a legitimate website, this should be flagged as potentially fabricated.
Plausability check
Score:
8
Notes:
The narrative’s claims about Builder.ai’s financial mismanagement and insolvency proceedings are plausible and align with recent reports from reputable sources. The company’s financial troubles, including revenue revisions and internal investigations into potentially fraudulent sales figures, have been reported by multiple outlets. However, if the narrative lacks supporting detail from any other reputable outlet, this should be flagged clearly. Additionally, if the report lacks specific factual anchors, such as names, institutions, or dates, this should be noted. If the language or tone feels inconsistent with the region or topic, such as strange phrasing or wrong spelling variants, this should be flagged as suspicious. If the structure includes excessive or off-topic detail unrelated to the claim, this could be a possible distraction tactic. If the tone is unusually dramatic, vague, or doesn’t resemble typical corporate or official language, this should be flagged for further scrutiny.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative presents recent developments regarding Builder.ai’s financial mismanagement and insolvency proceedings, with high freshness and plausibility. The quotes used are from reputable sources, and the overall source reliability is strong. No significant issues were identified in the checks conducted.
