Hundreds of staff unpaid after £1bn AI start-up goes bust

Yahoo

06-07-2025

Hundreds of former staff at a collapsed AI company once worth £1bn have been left unable to access redundancy payments amid talks over a fire sale of its assets.
Workers claim to have been left in limbo after being let go from the failed British AI champion in May. While Builder AI has filed for bankruptcy in the US, it has yet to appoint administrators in Britain where its main operations were based.
This has meant around 200 UK-based staff cannot claim redundancy pay from the Insolvency Service, which requires a case number normally supplied by restructuring advisers in the event of an administration.
A Builder AI spokesman said it was 'aware of the frustration' of staff, and confirmed investors and creditors were in advanced talks over a potential pre-pack administration, which would see its remaining assets and technology sold.
Builder AI has been lining up Alvarez & Marsal, a restructuring consultancy, to handle the administration.
One former Builder AI employee complained that they had been left in the dark during the process. They said: 'There's been no communication, no proper closure, and without the right paperwork, a lot of us still can't access the financial help we need.'
Former UK employees have not received any money since April.
The Telegraph understands that Jungle Ventures, Lakestar and US fund Insight Partners are among the parties involved in advanced talks to salvage parts of the business in a pre-pack deal. Such a deal should raise money to return funds to creditors, including ex-staff.
Sachin Dev Duggal, Builder AI's founder, is also understood to have explored launching a rescue bid alongside other investors. However, a source close to the talks said this approach was rebuffed.
Builder AI was backed by Microsoft and Qatar's sovereign wealth fund, and reached a valuation of $1.5bn (£1.1bn), making it one of Britain's rare 'unicorns' – a private tech company worth more than a billion. But it collapsed in May after lenders pulled tens of millions of pounds in funding amid claims that promised sales had come in far below expectations.
The start-up was founded by 42-year-old Mr Duggal in 2016, and developed what he called 'human-assisted AI'. A chatbot called Natasha was assisted by human contractors to help customers, including the BBC, build apps cheaply.
The venture unravelled after it emerged that sales forecasts had been wildly unrealistic. The business had predicted sales of $220m in 2024 when raising money from lenders. Sales for that year ultimately came in at around $50m. Mr Duggal was ousted in February and replaced by Manpreet Ratia, of investor Jungle Ventures.
The company's lenders, including tech investor Viola Credit, then pulled $40m from the business's accounts, citing covenant breaches. That decision left the business with almost no cash available to pay staff.
The Telegraph understands that New York prosecutors had issued a subpoena to Builder AI prior to its collapse for information about its accounting practices.
The Financial Times reported that an investigation into the sales shortfall at Builder AI had raised concerns over potentially inflated sales and circular transactions in past years.
A spokesman for Mr Duggal declined to comment. On LinkedIn, he said last month: 'There was no round-tripping,' referring to the allegations of circular transactions.
A spokesman for Builder AI said: 'We are working closely with the US administrator to initiate liquidation proceedings for the UK entity.
'The company has actively explored the option of a pre-packaged administration. The company has been actively seeking funding from existing stakeholders. We are now at the conclusion of this process and expect to proceed with formal filings in the UK next couple of weeks.'
Alvarez & Marsal and Lakestar declined to comment. Insight Partners was contacted for comment.
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