Builder.ai Files for Bankruptcy Amid Fraud Allegations

• Rapid Rise and Major Backing:

  Builder.ai, formerly Engineer.ai, positioned itself as an AI-driven app development platform. It attracted over $500 million in investments from prominent entities including Microsoft, Qatar’s sovereign wealth fund, Insight Partners, and SoftBank. The company claimed to simplify app creation using AI, though much of the work was performed by human engineers.

• Revenue Inflation and Financial Irregularities:

  An internal investigation revealed that Builder.ai had significantly overstated its revenues. For instance, 2024 revenues were revised down from $220 million to $55 million, and 2023 revenues from $180 million to $45 million. These discrepancies raised concerns about the company’s financial practices and led to a loss of investor confidence.

• Alleged Round-Tripping with VerSe Innovation:

  Between 2021 and 2024, Builder.ai allegedly engaged in “round-tripping” with Indian social-media startup VerSe Innovation, wherein both companies billed each other for similar amounts without actual services being rendered. This practice was purportedly used to inflate revenue figures presented to investors. VerSe Innovation has denied these allegations, stating that all transactions were legitimate and verified by external organizations.

• Leadership Changes and Legal Scrutiny:

  Founder Sachin Dev Duggal stepped down as CEO in early 2025 but remained on the board with the title “chief wizard.” The company appointed Manpreet Ratia as the new CEO in February 2025. Duggal’s tenure was marred by legal controversies, including investigations into fraudulent sales practices and inflated revenues.

• Debt and Insolvency Proceedings:

  Builder.ai defaulted on a $50 million loan from tech-focused lenders, leading to the seizure of its cash reserves. The company also owed $85 million to Amazon and $30 million to Microsoft. With dwindling funds and mounting debts, Builder.ai initiated insolvency proceedings in multiple jurisdictions, including the UK, US, India, and Singapore.

• Attempts at Restructuring:

  Despite the financial turmoil, Duggal explored options to repurchase the company or its key assets through a pre-packaged insolvency deal, requiring an estimated $10 million in initial funding and an additional $25 million to sustain operations. However, these efforts faced complications due to pledged intellectual property and existing debts.

• AI Misrepresentation and Human-Driven Operations:

  Builder.ai‘s AI companion, Natasha, was marketed as an AI-driven assistant for app development. However, reports indicate that Natasha’s functions were largely performed by human engineers, primarily based in India. This revelation further questioned the company’s claims of AI-driven solutions.

Why This Matters:

Builder.ai‘s downfall underscores the risks associated with overhyping AI capabilities and the importance of financial transparency. It serves as a cautionary tale for investors and startups in the AI sector, highlighting the need for due diligence, robust auditing, and realistic representations of technological capabilities.