In the fast-paced world of artificial intelligence, where promises of revolutionary technology fuel billion-dollar valuations, the spectacular collapse of Builder.ai serves as a sobering reminder: hype without substance is a recipe for disaster. Once hailed as a unicorn valued at $1.5 billion, backed by heavyweights like Microsoft and the Qatar Investment Authority (QIA), Builder.ai filed for bankruptcy in May 2025, leaving employees, investors, and clients reeling. The company’s downfall, marked by overstated revenues, financial mismanagement, and a misleading AI narrative, is not just the story of one startup’s failure—it’s a warning for an industry riding a wave of unchecked optimism.

The Rise: A Vision Too Good to Be True

Founded in 2016 by Sachin Dev Duggal in London, Builder.ai—originally named Engineer.ai—promised to revolutionize app development by making it “as easy as ordering a pizza.” The company pitched an AI-driven, no-code platform powered by an assistant named Natasha, enabling businesses to create custom smartphone apps without technical expertise. This vision resonated in a tech world hungry for accessible innovation, especially after ChatGPT’s 2022 debut sparked a frenzy of AI investment. Builder.ai quickly became a darling of the startup scene, raising over $450 million from prominent investors like Microsoft, QIA, SoftBank’s DeepCore, and Jungle Ventures, among others. By 2023, its valuation soared to $1.3 billion, with a $250 million funding round led by QIA cementing its near-unicorn status.

Duggal, a charismatic entrepreneur who began his career assembling PCs at 14 and built an automated trading system for Deutsche Bank by 17, was the face of this success. His bold claims and frequent appearances at tech events, including a 2024 Dubai Multi Commodities Centre AI summit, positioned him as a visionary. “Its founder, Sachin Dev Duggal, who has since moved to Dubai, has also been a prominent speaker at many conferences across the region, contributing thought leadership to the tech and business community,” a high-level Builder.ai employee told The National, underscoring his influence. Yet, beneath the polished pitch, cracks were forming.

The Cracks: Overstated Revenues and Financial Mismanagement

Builder.ai’s unraveling began with a devastating revelation: the company had wildly overstated its financial health. In 2024, it projected $220 million in sales for the year, but actual revenues were a mere $55 million—a staggering 300% overestimation. An internal investigation, prompted by concerns from former employees, uncovered “potentially bogus” sales, particularly through Middle East resellers, raising red flags about the company’s credibility. “Builder.ai had provided lenders with overstated financial projections, misrepresenting its revenue health,” according to a report by The Financial Express, shaking investor confidence.

The financial strain was compounded by a $50 million loan from Viola Credit in October 2024, intended to fuel growth. But by May 2025, “the lenders cited technical covenant breaches, swept over $40M in cash from our accounts, and restricted all access to funds, effectively shutting down our ability to operate,” CEO Manpreet Ratia wrote in a leaked investor memo. Viola Credit seized $37 million, leaving Builder.ai with just $5 million, most of which was trapped in Indian bank accounts due to regulatory restrictions. “The company’s remaining $5 million is located in Indian accounts and couldn’t be used to pay workers due to restrictions on the movement of money out of the country,” Ratia explained in an interview with Bloomberg. With only $5 million left and a daily burn rate of over $500,000, the company couldn’t cover salaries or sustain operations across its five jurisdictions: the UK, US, India, UAE, and Singapore.

The AI Facade: Humans Behind the Curtain

Perhaps the most damning revelation was that Builder.ai’s “AI-powered, no-code app builder” wasn’t as automated as advertised. “Turns out, the ‘AI-powered, no-code app builder’ was less artificial intelligence… more actual Indians. Behind the sleek interface were thousands of engineers manually building apps, masquerading as automation,” as the provided material starkly put it. Reports from sources like Tech Startups and The Financial Express confirmed that much of the platform’s work relied on developers in India and Ukraine, not AI. This disconnect between marketing and reality eroded trust. “Accusations surfaced… that the company relied heavily on Indian coders for manual work misrepresented as AI-driven processes,” The Financial Express noted, highlighting a broader issue of transparency in AI startups. Posts on X echoed this sentiment, with one user stating, “BuilderAI promised apps built by ‘Natasha the AI’ — turns out it was 700 devs coding manually. They faked the AI, fooled the VCs, and raised nearly $500M.”

The company’s troubles weren’t limited to finances. In February 2025, Sachin Dev Duggal was ousted as CEO amid mounting concerns about financial practices, though he retained the quirky title of “chief wizard” and a board position. Manpreet Ratia, a former Amazon and Flipkart executive and managing partner at Jungle Ventures, stepped in to stabilize the ship. Ratia acted swiftly, cutting 270 of the company’s 770 employees in April 2025—a 35% reduction—and securing a $75 million emergency capital injection in March. But it was too late. “The business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position,” Builder.ai stated on May 21, 2025, announcing insolvency proceedings.

Adding to the chaos, legal scrutiny loomed. In the weeks before the collapse, US prosecutors from the Southern District of New York issued subpoenas requesting financial statements and other documents, signaling a potential investigation into Builder.ai’s practices. “US prosecutors demanded that Builder.ai hand over financial statements and other documents, signaling that the artificial intelligence company was facing legal scrutiny in the weeks before it went bust,” Communications Today reported. Additionally, Duggal was named a suspect in a money laundering investigation in India, while co-founder Saurabh Dhoot faced accusations in a loan fraud case, further tarnishing the company’s reputation.

A High-Flying Startup Falls to Earth

Builder.ai’s collapse was as swift as its rise. “A High-Flying Startup Falls to Earth,” as the provided material aptly described it. Just two years after its $250 million funding round in 2023, the company’s insolvency marked “the biggest collapse of an AI start-up since ChatGPT’s 2022 release ushered in a surge of investment in the industry,” according to The Straits Times. The fallout was devastating: most employees were laid off, clients were left with unfinished apps, and investors like Microsoft, QIA, and Jeffrey Katzenberg’s WndrCo faced significant losses. The company also owed substantial debts, including $85 million to Amazon and $30 million to Microsoft.

The insolvency process itself highlighted the complexity of Builder.ai’s global operations. In the UK, where the company is headquartered, an administrator will oversee proceedings, working directly with creditors. Similar processes will unfold in the US, UAE, Singapore, and India, each following local regulations. Meanwhile, Duggal has reportedly approached investors to buy back parts of the failed company, though the feasibility remains unclear.

Lessons for the AI Ecosystem

Builder.ai’s story is a stark cautionary tale for the AI industry, where “FOMO investing”—driven by fear of missing out on the next big thing—has fueled unsustainable growth. “The dramatic collapse of Builder.ai exemplifies the growing risks of ‘FOMO investing,’” an expert in tech growth intelligence told TheNextWeb. The company’s missteps underscore several critical lessons:

Transparency is Non-Negotiable: “Inflated metrics might attract investors initially, but they erode trust and invite scrutiny. Honest financial reporting is critical,” as the material emphasized. Builder.ai’s 300% revenue overstatement shattered investor confidence and triggered creditor action.

Sustainability Over Scale: “Rapid growth fueled by debt and hype can backfire. Startups must prioritize viable business models over flashy valuations.” Builder.ai’s $500,000 daily burn rate, with revenues covering less than 9% of expenses, was a ticking time bomb.

AI Claims Need Substance: “Overpromising AI capabilities without delivering can damage credibility. Authenticity in tech is everything.” The revelation that Builder.ai relied on human coders rather than AI exposed a fundamental flaw in its pitch.

Governance Matters: “Strong leadership and accountability are vital to navigate challenges and maintain investor confidence.” The boardroom shakeup and Duggal’s exit highlighted a lack of oversight that allowed problems to fester.

A Wake-Up Call for AI

Builder.ai’s collapse is more than a corporate failure—it’s a mirror held up to an industry grappling with its own hype. “AI is not a business model. It’s a buzzword. Until it ships real product, it’s just venture-funded vapor!” the provided material declared, capturing the skepticism now surrounding AI startups. As regulatory scrutiny tightens and investors grow wary, the AI ecosystem faces a reckoning. “Builder.ai joins a growing list of AI ventures grappling with the pressures of commercialization and transparency in a white-hot market,” noted a report on news.futunn.com.

The company’s legacy may not be the apps it built but the lessons it leaves behind. “This story holds significant relevance as the company undergoes bankruptcy proceedings,” a Builder.ai employee told The National, reflecting on its broader impact. For every startup chasing the AI dream, Builder.ai’s fall is a stark reminder: innovation must be grounded in trust, integrity, and real value. As one X post put it, “Builder Ai went from unicorn to bankruptcy in 9 years… They faked the AI, fooled the VCs, and raised nearly $500M. Even Microsoft bought the pitch.” In the race to build the future, Builder.ai’s crash shows that shortcuts lead to dead ends.