It turns out Builder.ai was more artificial than intelligent.
The $1.5 billion artificial intelligence (AI) company backed by Microsoft Corp. recently shuttered operations after its neural network was exposed to actually be 700 engineers in India.
Builder.ai, which has begun formal bankruptcy proceedings in jurisdictions where it operated, including India, the U.K., and the U.S., said on LinkedIn it would be “entering into insolvency proceedings.”
“Despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position,” the company wrote.
The company’s Natasha, an AI app-building service, helped it land a strategic collaboration and “significant” investment with Microsoft two years ago. At the time, Builder.ai CEO Sachin Dev Duggal said, “From my first meeting with Microsoft to the moment we agreed to collaborate more strategically, one thing has been really clear — Microsoft’s commitment to helping everyone unlock their true potential.”
Documents reviewed by Bloomberg showed Builder worked with VerSe, an India-based social media startup, to falsely increase its sales numbers, regularly billing each other for similar amounts between 2021 and 2024. “We’re not the kind of company that is in the business of inflating revenues,” VerSe co-founder Umang Bedi told Bloomberg, calling the accusations “baseless and false.”
The sudden rise and fall of Builder.ai serves as a cautionary tale in an industry overflowing in hype, and one susceptible at times to scams. Since it was founded in 2016, the company originally known as Engineering.ai has been embroiled in scandal. It promised to make software creation “as easy as ordering pizza” and marketed its AI assistant, Natasha, as a breakthrough in building software with minimal human input.
At its peak, Builder.ai raised more than $450 million from the likes of Microsoft, SoftBank’s DeepCore, and IFC to reach a valuation of $1.5 billion.
But there were cracks in the corporate facade.
Employees and outsiders pointed out Builder.ai relied on about 700 engineers in India who manually wrote code for client projects while the company misrepresented the work as AI-generated.
Former employee Robert Holdheim sued the company for $5 million, alleging he was fired after flagging concerns over deceptive practices. Legal filings subsequently revealed Builder.ai misled investors by claiming apps were “80% built” by AI though the supporting tech was barely functional. A 2019 investigation by the Wall Street Journal found most of the coding was done manually.
And the saga of Builder.ai is far from over: The company reportedly owes $85 million to Amazon.com Inc. and $30 million to Microsoft in unpaid cloud services. A U.S. federal probe is underway, with investigators seeking access to its financial and client data.
