Once hailed as a rising star in the artificial intelligence space, British tech startup Builder.ai has filed for bankruptcy, marking a dramatic downfall for a company that was, until recently, valued at $1.5 billion. Backed by Microsoft and the Qatar Investment Authority (QIA), the startup is now under investigation by both UK and US authorities following revelations of inflated financial statements and misleading claims about its AI capabilities.
As first reported by Bloomberg, the company’s collapse began after creditor Viola Credit, which had loaned Builder.ai $50 million in 2023, seized $37 million from its accounts. The seizure, reportedly triggered by a breach of loan terms, left Builder.ai with just $5 million—funds stranded in Indian accounts due to currency transfer restrictions, according to CEO Manpreet Ratia. In a recent interview, Ratia confirmed that most employees have now been laid off.
Builder.ai had claimed to revolutionize software development by using AI to deliver custom applications in “days or weeks,” touting a platform that generated production-ready code with minimal human input. The company attracted global attention and capital, including a $250 million Series D round in 2022 led by QIA, and a strategic investment by Microsoft in 2023.
However, a Bloomberg investigation revealed a very different picture behind the scenes. Internal documents and insider accounts suggest that Builder.ai had, for years, relied on more than 700 human engineers contracted from VerSe Innovation, an Indian tech company best known for its social media app Dailyhunt. Custom apps were based on pre-built templates and customized by hand—contrary to the company’s marketing, which portrayed these processes as AI-driven.
Further controversy centers around allegations of “round-tripping” between Builder.ai and VerSe. Between 2021 and 2024, the two companies allegedly billed each other for nearly identical amounts, creating the illusion of commercial activity and revenue. Sources claim many of these transactions had no real services or products exchanged, and were designed to inflate revenue figures later presented to investors. In total, Builder.ai is believed to have claimed about $60 million in revenue from VerSe, while making similarly timed payments back to VerSe and its subsidiary, Quark Media Tech, for so-called marketing services.
VerSe cofounder Umang Bedi has denied the accusations, calling them “absolutely baseless and false,” and insisted that his company “is not in the business of inflating revenues.”
According to the Korean Herald, Builder.ai had recently acknowledged to Bloomberg that it was forced to revise its 2024 revenue projections downward by 300%, and had hired auditors to review two years of financial accounts. These admissions came only weeks after inquiries from Bloomberg regarding concerns raised by former employees.
Skepticism about Builder.ai’s AI capabilities isn’t new. As early as 2019, a Wall Street Journal report cast doubt on the company’s technological claims, citing multiple former staff who described its operations as “all engineer, no AI.” Despite the early red flags, the company managed to attract substantial backing, and maintained its image as an AI disruptor—until its financial foundation came under serious scrutiny.
Builder.ai’s collapse is likely to raise broader questions about due diligence in the AI investment boom, as well as accountability in venture-backed tech startups making lofty claims. For now, its spectacular rise and rapid fall serve as a cautionary tale at the intersection of hype, technology, and finance.
