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Business Standard
2 days ago
- Business
- Business Standard
Builder.ai faked AI with 700 engineers, now faces bankruptcy and probe
Once valued at $1.5 billion, collapsed after it was exposed for passing off human-written code as AI-generated, triggering global layoffs, audits, and regulatory scrutiny Founded in 2016 by Sachin Dev Duggal, — previously known as — positioned itself as an artificial intelligence (AI)-powered no-code platform designed to simplify app development. Headquartered in London and backed by major investors including Microsoft, the Qatar Investment Authority, SoftBank's DeepCore, and IFC, the startup promised to make software creation "as easy as ordering pizza". Its much-touted AI assistant, Natasha, was marketed as a breakthrough that could build software with minimal human input. At its peak, raised over $450 million and achieved a valuation of $1.5 billion. But the company's glittering image masked a starkly different reality. Behind the curtain: 700 engineers, not AI Contrary to its claims, development process relied on around 700 human engineers in India. These engineers manually wrote code for client projects while the company portrayed the work as AI-generated. The façade began to crack after industry observers and insiders, including Linas Beliūnas of Zero Hash, publicly accused of fraud. In a LinkedIn post, Beliūnas wrote: 'It turns out the company had no AI and instead was just a group of Indian developers pretending to write code as AI.' Red flags as early as 2019 AI narrative had long drawn scepticism. A 2019 investigation by the Wall Street Journal found that most of the coding was done manually, with the AI capabilities largely exaggerated. Former employee Robert Holdheim sued the company for $5 million, claiming he was fired after flagging concerns over deceptive practices. Legal filings revealed had misled investors by claiming apps were '80% built' by AI, though the supporting tech was barely functional. Other ex-employees later confirmed the company was 'all engineer, no AI'. Financial irregularities and collapse In early 2025, a leadership shake-up saw Manpreet Ratia replace Duggal as CEO in a bid to restore investor confidence. But Ratia discovered the company had massively inflated its 2024 revenue — claiming $220 million when actual income was closer to $50 million. An independent audit exposed the discrepancy, prompting lender Viola Credit to seize $37 million from accounts. Left with only $5 million in restricted funds, the company's operations across five countries — including India, the UK, and the US — came to a standstill. With regulatory issues freezing fresh capital, failed to pay staff, leading to nearly 1,000 layoffs. Allegations of financial misconduct Further inquiries suggested may have engaged in 'round-tripping' with Indian social media firm VerSe to inflate sales numbers — a tactic that helped attract investment. The company reportedly owes $85 million to Amazon and $30 million to Microsoft in unpaid cloud services. A US federal probe is underway, with investigators seeking access to its financial and client data. Public admission and bankruptcy filing In a statement on LinkedIn, admitted defeat: '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 has begun formal bankruptcy proceedings in jurisdictions where it operated, including India, the UK, and the US. AI hype vs. startup reality downfall has reignited concerns around 'AI washing' — branding basic tech services as AI to capitalise on investor excitement. Phil Brunkard of Info-Tech Research Group noted that many startups 'scaled fast without robust technology or governance', riding a wave of unchecked hype. With regulators now probing how AI firms market their products, the episode has become a cautionary tale. What was sold as an AI revolution turned out to be a conventional outsourcing firm cloaked in buzzwords. The result: employees out of work, millions in investor losses, and renewed demands for transparency and accountability in the AI startup ecosystem.
Mint
22-05-2025
- Business
- Mint
Mint Explainer: How can Builder.ai's collapse impact AI investments in India?
BENGALURU : Once hailed as a pioneer in the low-code/no-code (LCNC) movement, London-based formerly known as has filed for insolvency. Founded in 2016 by Sachin Dev Duggal and Saurabh Dhoot, two entrepreneurs from India's national capital region, raised around $450 million from top-tier investors, including SoftBank's DeepCore, Microsoft, Qatar Investment Authority, Insight Partners, International Finance Corporation (IFC), Lakestar, Jungle Ventures, and Iconiq Capital. Their value proposition was simple yet ambitious: make app development 'as easy as ordering pizza" by enabling users to build custom applications without needing to write code. However, the startup, valued at $1.7 billion at its peak, saw a rapid rise and a dramatic fall in its last two years. Mint explains what led to its downfall. What is It is an LCNC platform that allows people to build custom apps for their mobile devices without requiring any technical know-how. In the company's words, they wanted to make the process of building an app as 'easy as ordering pizza". Also Read: What Google Search's chief has to say on AI—an extension, not a replacement Originally named the company was launched with the vision of using artificial intelligence (AI) to democratise software development. The founders sought to combine the power of AI with human expertise to deliver scalable and customised apps for clients ranging from individuals to enterprises. In November 2018, over two years after it was founded, raised its first round of funding in a $29.5 million Series A round led by European venture capital firm Lakestar and Indian early-stage venture capital firm Jungle Ventures. Softbank's AI incubator, DeepCore, also participated in that round. The company went straight for a Series C round, raising $100 million from venture capital and private equity firm Insight Partners and IFC. WndrCo, founded by file hosting service Dropbox's former head of business and chief financial officer Sujay Jaswa and Jeffrey Katzenberg, also participated. In 2023, it raised a $250 million Series D round led by the Qatar Investment Authority and joined by Microsoft and American investment management firm Iconiq Capital. However, within a year, the company faced data leaks, governance controversies, and regulatory investigations. By early 2025, its founder stepped down, and a board shake-up ensued. Despite course-correction efforts, the firm ran out of money, culminating in its insolvency filing. What went wrong at Over time, has courted its fair share of controversies, whether it's accusations of inflated tech expertise or financial mismanagement so severe that a member of the company's board had to step in to take charge. As early as 2019, the company was accused of not having an AI-based platform but instead relying on human engineers to write the code, according to a report from the Wall Street Journal. In essence, the firm was hiring cheap offshore labour to manually build apps, raising questions about whether its AI claims were merely a façade to attract investors. Also Read: Indian companies lag in workforce upskilling amid AI disruption, job cuts Soon after, Duggal released a note on the company website saying they had offered to speak with the WSJ six times and that the newspaper didn't report on the answers that had provided. That same year, its chief business officer sued the startup for exaggerating its AI capabilities so as to raise funding that they'd use to build the technology, according to a report from The Verge. Then, in 2024, according to a Financial Times report, India's financial investigation agency, the Enforcement Directorate (ED), named Duggal and Dhoot in a money laundering probe and a loan fraud case, respectively. Dhoot is the nephew of the late Venugopal Dhoot, chairman of Videocon Group, the Indian conglomerate that filed for bankruptcy in 2018 after defaulting on massive bank loans. Indian enforcement agencies formally named the co-founder in a criminal case for participating in a 'criminal conspiracy" to fraudulently secure loans from some of the country's largest state-owned banks as part of the broader Videocon-ICICI Bank scandal. Duggal was also being investigated for his ties with Videocon. The ED summoned him in 2022, but he didn't show up. The agency changed his designation from 'witness" to 'suspect", according to the FT report. In December 2024, the company unwillingly exposed sensitive user data online after a researcher discovered an archive with over three million records online, according to a report from Tech Radar. The archive included non-disclosure agreements, billing-related documents, tax documents, internal file images, and more. In February 2025, as investor confidence waned, board initiated a governance overhaul. Manpreet Ratia, managing partner at Jungle Ventures, replaced Duggal as CEO. The board was reduced from nine seats to five, and Duggal relinquished control over most of them. Jungle Ventures, which had participated in the company's first funding round, effectively took the reins to attempt a last-minute salvage operation. In March, the company was once more accused of using auditors with direct connections to Duggal, the FT reported. The partner of the auditing firm had previously served as director at a company set up by Duggal. Will it impact VC appetite for AI in India? has now joined a growing list of Indian startups that have had to close or are in deep waters due to fraudulent activities and poor corporate governance. The most recent examples include BluSmart, Bizongo, Medikabazaar, and Kult App, among others. Also Read: Mint Explainer: Microsoft envisions a web driven by AI agents. What will it look like? However, while collapse may raise red flags about governance, it is unlikely to derail overall investor interest in India's AI ecosystem. Industry leaders and investors argue that this is more a case of a single company's failure rather than a systemic issue. 'Just like one swallow doesn't make a summer, similarly, one doesn't dampen investor sentiment. It just makes investors more careful on governance," said Akshay Gupta, whole-time director of Prime Securities, an investment banking and corporate advisory services company. There's some truth to it. According to the Stanford AI Index 2024, India currently ranks number one in AI skill penetration globally. At the same time, VC firms are looking at both founders and their startups more critically, especially those building in the application layer. 'Venture capital firms are now moving from valuation-first to validation-first investing. They are prioritising tech validation, customer traction and ethical AI practices," said Munish Vaid, vice president at Primus Partners. 'A few incidents would not change the underlying fundamentals, which remain strong: India has deep technical talent, unique cost advantages, and the ability to productise AI globally. Investors will simply be more selective and thorough, not less interested," said Ravi Srivastava, partner at Leo Capital, an early-stage VC firm. But not everyone is convinced that fall won't affect foreign investment. 'This signals that even late-stage unicorns are not insulated from elementary governance failures. Similar collapses at other startups have eroded confidence in financial reporting and transparency," said Siddharth Mody, partner at JSA Advocates & Solicitors. As a result, Mody said it's not just international capital that becomes more selective, but that 'reputational damage also extends to global corporates and limited partners that backed these companies without insisting on tighter oversight". 'The Indian startup ecosystem needs more capital but also more accountability. Founders, boards, and investors must align around the principle that governance is not a post-public listing requirement but a precondition to scale," he added. How has the LCNC ecosystem evolved? The LCNC movement has matured considerably since early days in 2016. What began as a drag-and-drop solution for building apps without programming knowledge has evolved into a sophisticated AI-assisted development paradigm now termed 'vibe coding". Unlike traditional LCNC platforms, vibe coding retains full-stack power while making development faster and more intuitive via AI prompts, automation, and smart code generation. The Indian LCNC market has grown from $400 million in 2020–21 to a projected $4 billion in 2025, according to IT industry body Nasscom. Still, experts warn that these tools are best suited for rapid prototyping and internal tooling, not yet ready for compute-heavy or highly regulated enterprise environments. Performance, security, and integration complexity remain barriers to full-scale enterprise adoption. Sakshi Sadashiv in New Delhi contributed to the explainer.
Yahoo
20-05-2025
- Business
- Yahoo
Once worth over $1B, Microsoft-backed Builder.ai is running out of money
AI software company is entering insolvency proceedings, a company spokesperson confirmed to TechCrunch. The Microsoft-backed unicorn, which has raised more than $450 million in funding, rose to prominence for its AI-based platform that aimed to simplify the process of building apps and websites. According to the spokesperson, also known as Corporation, is appointing an administrator to "manage the company's affairs." "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 said in a statement. "Our immediate priority is to support our employees, customers, and partners through this difficult time. We will work closely with the appointed administrators to ensure an orderly process and to explore all available options for parts of the business, where possible." has faced major leadership shakeups and financial issues over the past few months. In March, it was reported that the company last summer lowered its estimated revenue by 25% for the second half of 2024. In February, the company appointed a new CEO, Manpreet Ratia. hired auditors to study its financials, indicating that something may have been off behind the scenes. According to Bloomberg, former employees alleged that the company had inflated sales figures by more than 20% on multiple occasions. Before largely rebranded to it attracted minor scandal. claimed to have built a largely automated app development platform, but the platform in truth relied heavily on human engineers, according to The Wall Street Journal. This article originally appeared on TechCrunch at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
