TLDR : The British startup Builder.ai, specializing in no-code/low-code and AI, declared insolvency after allegations of questionable transactions and inflated revenues. Despite a $1.5 billion valuation and investors such as Microsoft and the Qatar sovereign fund, the company was unable to convert these investments into sustainable revenues.
Founded in 2016, the London unicorn Builder.ai managed to ride the wave of the no-code/low-code market and the enthusiasm for AI, attracting top investors such as Microsoft and the Qatar sovereign fund. The revelation of inflated revenues and questionable transactions with the Indian company VerSe Innovation hastened the company's downfall, which filed for insolvency last week.
When Sachin Dev Duggal launched Builder.ai, the project was appealing due to its clarity: radically simplifying software creation with an AI named Natasha, automating the design and development of applications and significantly reducing time and costs. In 2019, the Wall Street Journal revealed that the AI promise hid a more mundane reality: the massive use of human developers based in India who manually performed a large portion of the work. This hybrid model, between claimed automation and concealed outsourcing, raised questions but did not cause a rupture.
Thanks to well-tuned communication, the startup attracted prestigious investors: the Qatar Investment Authority (QIA), Insight Partners, and Microsoft, which in 2023 integrated the platform into the Azure ecosystem as part of a strategic partnership. The implicit validation of these renowned investors bolstered the company's credibility, which was also recognized that same year by Fast Company's annual World's Most Innovative Companies ranking as a leading innovator in the AI field.
However, this recognition, partly founded on projections and a well-managed image, was not always accompanied by a rigorous examination of operational reality.
Artificially Inflated Revenues through "Round-Tripping"
Despite a valuation raised to $1.5 billion, Builder.ai failed to convert these massive investments into sustainable revenues, and its financial situation deteriorated last year.
Rumors began circulating about mutual billing between Builder.ai and VerSe Innovation (parent company of Dailyhunt) without actual services: a "round-tripping" mechanism intended to make revenue appear higher. The report from the law firm appointed by the board revealed that sales had been recorded before payments were actually received, or even without firm contracts in place. It adjusted the revenue projection for 2024, which dropped from $220 million announced to about $55 million, and from $180 million for 2023 to only $45 million.
These revisions triggered default clauses from Viola Credit, which had lent $50 million to Builder.ai. Last May, the debt fund seized over $37 million from the company's accounts, citing a breach of contractual commitments related to the presentation of financial results. Only $5 million in cash remained, most of which was blocked in accounts in India, making any continuation of activities impossible.
The unicorn, facing a federal investigation in the United States, stated on LinkedIn:
"Despite the tireless efforts of our current team and exploring all possible options, the company has been unable to recover from historical challenges and past decisions that placed significant pressure on its financial situation. Our immediate priority is to support our employees, customers, and partners during this difficult time. We will work closely with the appointed administrators to ensure an orderly process and to explore all available options for certain parts of the business, as much as possible."
Translated from Builder.ai : une success story rattrapée par la réalité