Builder.AI, a startup once valued at over
$1.5 billion and backed by Microsoft, has filed for bankruptcy following a financial crisis triggered by a
$37 million seizure by Viola Credit, a senior lender. The seizure led to a loan default and left the company with only
$5 million in cash, which was restricted from use, forcing layoffs.
The company had marketed itself as an AI-driven software development platform, but investigations revealed that much of the work was actually done by human developers in India, not artificial intelligence. This revelation has raised serious ethical concerns about transparency in the AI startup industry.
CEO Manpreet Ratia, who took over just two months before the insolvency filing, struggled to stabilize the company amid investor pullouts and financial troubles despite the startup raising over
$250 million in its Series D funding round led by Qatar Investment Authority in June 2023.
"The Microsoft-backed firm’s AI companion Natasha has been a bunch of Indian coders all this time, with no artificial intelligence involved," sources revealed.
The scandal leaves many clients stranded and highlights the risks of overhyping AI capabilities in startups. Builder.AI’s downfall serves as a cautionary tale about the importance of transparency and due diligence in the rapidly evolving AI sector.
The company’s collapse also underscores the challenges startups face in balancing investor expectations with operational realities, especially when technology claims are overstated.
Builder.AI, once valued at over $1.5 billion and backed by Microsoft, filed for bankruptcy after Viola Credit seized $37 million, exposing its AI claims as largely false. The company relied on Indian developers instead of AI, leading to loan defaults, investor pullouts, and ethical concerns in the AI startup sector.
