Startup once hailed as an AI game-changer files for bankruptcy amid claims of deception and unsustainable business model

In the era of AI-fueled disruption, few startups captivated Silicon Valley and global investors quite like Builder.ai. Promising to make software creation “as easy as ordering pizza,” the London-based company rose quickly on the strength of its pitch — a platform where anyone, regardless of technical skill, could build complex applications through artificial intelligence.

But by May 2025, the dream had unravelled. Builder.ai, once valued at over $1.3 billion and backed by heavyweights like Microsoft and the Qatar Investment Authority (QIA), filed for bankruptcy, marking one of the most dramatic collapses of an AI startup in recent memory.

From bold vision to billion-dollar backing

Founded in 2016 by Sachin Dev Duggal, Builder.ai positioned itself as the answer to the slow, expensive world of traditional software development. Its central product, “Builder Studio,” was marketed as a sleek AI-powered platform that assembled apps from modular code components. It even came with a digital assistant named Natasha, allegedly driven by artificial intelligence to guide users through the process.

The concept was seductive. Between 2022 and 2023, the company raised over $445 million in funding rounds — including a $250 million round led by QIA — and gained further legitimacy through a strategic partnership with Microsoft, which integrated Builder.ai into its Azure ecosystem.

Behind the curtain: No AI, just engineers

But beneath the surface, the technology wasn’t what it seemed. In 2019, The Wall Street Journal exposed a harsh truth: most of the work was being done manually by engineers in India. The AI, insiders and reports revealed, was little more than a marketing veneer. “All engineer, no AI,” the Journal wrote.

Despite the revelations, Builder.ai pushed forward, continuing to scale its workforce, open new international markets, and double down on its AI narrative. Former employees now say that internally, the company relied on inflated revenue forecasts and exaggerated AI claims to secure investor confidence and debt financing.

Financial implosion and final reckoning

The house of cards collapsed in May 2025, when Viola Credit, a senior lender, seized $37 million from Builder.ai’s accounts following a covenant breach. The company had allegedly misrepresented its financial health and projections to lenders. With just $5 million left in its reserves, CEO Manpreet Ratia, who had been appointed only two months earlier to salvage the firm, filed for insolvency.

Ratia reportedly addressed the staff in a grim all-hands call, admitting that the business model had never aligned with the company’s ambitious branding. Most of Builder.ai’s workforce was laid off. Its once-flagship platform was discontinued.

AI washing under the microscope

Builder.ai’s implosion has reignited scrutiny over “AI washing”—a” phenomenon where companies exaggerate or falsely claim artificial intelligence capabilities to attract capital and partnerships. Industry analysts point to Builder.ai as a cautionary tale of hype-driven investing in an era where due diligence often lags behind innovation buzz.

“This isn’t just about one company’s collapse,” said a senior venture analyst familiar with the matter. “It’s about the broader consequences of conflating marketing narratives with technological truth.”

Ripple effects and industry outlook

The collapse has left hundreds of startups and small businesses, many of whom relied on Builder.ai for core software, scrambling to rebuild or migrate their applications. The abrupt shutdown has served as a wake-up call about the risks of depending on emerging platforms for mission-critical infrastructure.

Still, analysts remain bullish on the broader low-code/no-code sector. According to Gartner, 60% of new enterprise apps will be built using such platforms by 2028, and the global market is projected to hit $26 billion by the end of 2025.

Builder.ai’s legacy, however, is likely to be more cautionary than revolutionary. From Gartner accolades and Fast Company rankings to marquee investors and flashy partnerships, the company had all the trappings of a tech unicorn. But as the dust settles, it appears that Builder.ai’s greatest innovation may have been its story, not its software.

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