How this billion-dollar London startup backed by Microsoft made 700 engineers sitting in India pose as AI
Builder.ai
, once valued at $1.5 billion and backed by
Microsoft
and Qatar's sovereign wealth fund, has filed for bankruptcy after reports that its "AI-powered" app development platform was actually operated by Indian engineers, said to be around 700 of them, pretending to be artificial intelligence.
The startup, which raised over $445 million from investors including Microsoft and the Qatar Investment Authority, promised to make software development "as easy as ordering pizza" through its AI assistant "Natasha." However, as per the reports, the company's technology was largely smoke and mirrors, human developers in India manually wrote code based on customer requests while the company marketed their work as AI-generated output.
Builder.ai's dramatic collapse came in May 2025 when lender
Viola Credit
seized $37 million from the company's accounts after discovering the startup had inflated its 2024 revenue projections by 300%. Founder
Sachin Dev Duggal
had promised $220 million in sales to creditors, but an independent audit revealed actual revenue of just $50 million.
Years of deception behind AI claims
The deception wasn't new. As early as 2019, The Wall Street Journal exposed Builder.ai's questionable AI claims, revealing that the platform relied heavily on human contractors rather than artificial intelligence. Multiple former employees described the company as "all engineer, no AI," with most development work performed manually by staff in India.
Former employee Robert Holdheim sued the company for $5 million in 2019, alleging he was dismissed after complaining that Builder.ai's technology "did not work as promoted and was essentially nothing more than 'smoke and mirrors'." Court filings claimed the company told investors apps were "80% built" by AI technology they had "barely even begun to develop."
Regulatory scrutiny and bankruptcy filing
The scheme unraveled when new CEO
Manpreet Ratia
, brought in to replace Duggal in February, discovered the extent of the financial misrepresentations. US prosecutors in New York have since demanded the company's financial statements and customer lists as part of a federal investigation.
Builder.ai's collapse represents the largest AI startup failure since ChatGPT's launch triggered a global investment frenzy. The company now owes $85 million to
Amazon
and $30 million to Microsoft in cloud computing fees, while approximately 1,000 employees have lost their jobs.
The failure highlights growing concerns about "AI washing," companies rebranding conventional technology services as artificial intelligence to attract investment in the current AI boom.
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