On an ordinary day in May 2025, employees at Builder.ai turned on their computers only to discover that the company that had promised to revolutionize the world of software development was on the brink of collapse.
Within minutes, internal emails announced mass layoffs, as clients and partners watched in disbelief while the dream of the “AI that does it all” crumbled before their eyes.
So, how did a company once valued at over $1.3 billion come to this? The answer lies in over-the-top promises, an opaque business model, and financial management that proved to be as weak as its so-called algorithms.
Origins and Market-Captivating Promises
Builder.ai was founded in London in 2016 with an ambitious mission: to enable anyone, without a single shred of programming knowledge, to create custom applications.
The centerpiece of its pitch was “Natasha,” a virtual assistant that supposedly used artificial intelligence to translate users’ ideas into lines of code. The narrative was perfect: remove technical barriers, accelerate launch times, and drastically reduce costs.
This promise attracted the attention of renowned investment funds. Microsoft, Insight Partners, and Qatar’s sovereign fund poured more than $450 million into the company, driving its valuation to over $1.3 billion.
In short, Builder.ai was the epitome of the so-called “unicorn startup”: disruptive innovation, explosive growth, and an almost mythical tech aura.
The Truth Behind the Curtain: 700 Engineers in the Shadows
However, behind the futuristic rhetoric lay a much more mundane operation. Instead of a sophisticated neural network writing code, Builder.ai relied on an army of around 700 engineers based in India.
Hired through subcontractors, these professionals were the ones actually building the applications, line by line, while the company claimed it was all the work of “Natasha” and its algorithms.
The leak of this information by outlets like Business Today and The Register exposed the deception. For investors and clients, it was a double blow: not only did they feel cheated, but the company’s transparency was now in question.
Builder.ai attempted to backtrack, acknowledging the human labor behind its platform, but the trust had already been eroded.
Financial Red Flags: From Defaulted Loans to Bankruptcy
Beyond the lack of technological clarity, Builder.ai’s financial situation was increasingly unstable. In 2023, the company secured a crucial $50 million loan from Viola Credit, but it soon defaulted on the agreed terms.
By May 2025, Viola Credit triggered a recall clause and seized $37 million from Builder.ai’s accounts, leaving it with a meager $5 million in cash. The situation worsened when it became clear that the remaining funds, held in Indian accounts, were frozen due to regulatory restrictions.
To make matters worse, the company corrected its revenue figures: the reported numbers for 2023 were revised down from $180 million to just $45 million, and projections of $220 million were slashed to $55 million.
These adjustments, driven by the new CEO Manpreet Ratia, exposed how under the management of co-founder and former CEO Sachin Dev Duggal, revenue figures had been artificially inflated.
In March 2025, Duggal was replaced by Ratia, a managing partner at Jungle Ventures, in a desperate attempt to regain investor confidence and save the company.
However, on May 20, 2025, Ratia formally announced the start of insolvency proceedings, citing “past decisions that irreparably strained the company’s finances.”
Consequences for Employees, Clients, and Investors
At its peak, Builder.ai employed over 1,000 people worldwide. After several previous rounds of cuts, the workforce had been reduced to 770 employees, many of whom were immediately laid off when the bankruptcy became official.
Furthermore, Builder.ai was saddled with millions in debt: it owed $85 million to Amazon for cloud services and $30 million to Microsoft for licenses and its strategic partnership.
For its clients, mostly startups and small businesses, the shutdown was a massive blow. Many relied on the platform for the maintenance and evolution of their applications.
Overnight, they were forced to migrate data, hire new providers, or even completely redesign their products, incurring additional costs and significant project delays.
Investors were left empty-handed: the valuation that had surpassed a billion dollars almost completely vanished. The case of Builder.ai became a classic example of investment driven by “FOMO” (Fear Of Missing Out), where the fear of being left behind in the tech wave clouded proper due diligence.
Lessons and Reflections for the Tech Industry
The collapse of Builder.ai sparked a wave of commentary on social media and industry forums. On platforms like X (formerly Twitter), data engineer Kirk Borne quipped: ” “Turns out Builder.ai was coding its own grave. AI? More like an army of freelancers in India and poor decision-making. ”.
He even compared it to the Theranos health startup fraud. Other analysts highlighted that federal authorities are investigating allegations of falsified revenue to the tune of around $60 million, stemming from inflated invoices and fictitious transactions with partners in India.
The story of Builder.ai leaves several key lessons:
- Transparency Above All: In a sector as sensitive as AI, credibility is a key asset. Promising technology that, in practice, doesn’t exist can be catastrophic.
- Rigorous Financial Management: Rapid growth is tempting, but without solid controls and audits, numbers can be artificially inflated, triggering a crisis.
- Informed Investment: Investors must look beyond the “hype” and analyze the real viability, internal processes, and regulatory risks of each startup.
The Future of Low-Code and AI After the Collapse
Despite Builder.ai’s failure, the market for low-code and no-code platforms continues to gain ground.
This sector is estimated to surpass $26 billion this year, driven by the need for companies of all sizes to accelerate application development without relying on expensive teams of programmers.
However, the Builder.ai case has left an indelible mark: users and organizations now demand greater transparency, guarantees that the AI delivers on its promises, and solid ethical practices.
In a post-Builder.ai environment, any company claiming to be “AI-powered” knows it will be subjected to much more rigorous scrutiny.
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