Microsoft-backed UK tech unicorn Builder.ai has collapsed into insolvency, facing intense scrutiny over its sales practices and accounting. The company, once valued at over $1 billion, confirmed its main unit, Engineer.ai Corporation, would enter insolvency proceedings, appointing an administrator to manage its affairs. This dramatic downfall follows revelations of potentially bogus sales and a significant restatement of its 2023 accounts.
The Rise and Fall of a Unicorn
Builder.ai, founded by Sachin Dev Duggal, promised to revolutionise app development using AI, attracting over $450 million in funding from prominent investors including Microsoft, SoftBank, and Qatar's sovereign wealth fund. Despite its impressive backing and a valuation exceeding $1 billion, the company's foundation appears to have been built on shaky ground.
Allegations of Deception and Financial Irregularities
The collapse comes amid serious allegations:
- "AI Theatre": Critics claim Builder.ai's much-touted AI, "Natasha," was in fact a team of 700 Indian coders manually building apps, mimicking AI response times.
- Revenue Overstatement: An internal audit reportedly revealed that Builder.ai's real revenue was significantly lower than reported, with claims of $180 million in fake invoices exchanged with another company, VerSe Innovation.
- Data Breach: A December 2024 breach exposed 3.1 million client records and internal memos discussing "AI placebo effects."
Leadership Changes and Restructuring
In March, Sachin Dev Duggal stepped down as CEO, retaining the title of "chief wizard." Manpreet Ratia, managing partner at Builder.ai investor Jungle Ventures, took over as CEO. In April, the company underwent a "significant restructuring," cutting approximately 270 employees, or 35% of its global staff. Ratia also confirmed the company had lowered its reported 2023 revenues to $140 million due to underperforming Middle East resellers.
Key Takeaways
- Builder.ai's main unit, Engineer.ai Corporation, is entering insolvency proceedings.
- The company cited "historic challenges and past decisions" for its financial strain.
- Allegations include faking AI capabilities and inflating sales figures.
- Significant layoffs and a CEO change preceded the insolvency announcement.
Impact and Future
The immediate priority for Builder.ai is to support its employees, customers, and partners while working with the appointed administrators. The company's downfall serves as a cautionary tale in the rapidly expanding AI sector, raising questions about due diligence and the true capabilities of some highly-funded startups.
Sources
- The wild ride of a Microsoft-backed tech unicorn, Financial Times.
