Once valued at $1.5 billion, British AI startup Builder.ai filed for Chapter 7 bankruptcy last June 2 after investigations revealed that its heavily promoted neural network was, in reality, powered by 700 Indian engineers manually handling tasks behind the scenes.
The Microsoft-backed artificial intelligence company announced on their official Linkedin page that they would be “entering into insolvency proceedings and will appoint an administrator to manage the company’s affairs.”
Founded in 2016 and originally known as Engeneering.ai, the startup raised $450 million from the likes of other companies as well, namely, Qatar Investment Authority, Softbank’s DeepCore and IFC, leading them to their aforementioned valuation.
The AI app-building service known as “Natasha” would reportedly “design and code applications autonomously and at unprecedented speed.” Further, founder Sachin Dev Duggal positioned the service as an “AI-powered no-code platform designed to simplify app development,” deeming the software model to be “as easy as ordering pizza.”
These illustrations were subject to allegations of fraud after observers from its industry together with insiders, particularly Zero Hash’s Linas Beliūnas took to his Linkedin and posted, “It turns out the company had no AI, and instead was just a group of Indian developers pretending to write codes.”
Beliūnas amplified, “Founder & CEO Sachin Dev Duggal has also reported fake revenue to investors. Somehow, the company was able to keep this scam going for 8 years.”
Employees, on the other hand, brought to light that while “several clerical tasks were assisted by general software, the bulk of coding and app development was performed manually.”
Apart from these reports, it is apparent that skepticism had long surrounded Builder.ai’s claims with their AI narrative of their model Natasha. The Wall Street Journal was reported to have investigated the company back in 2019 and found that “most of the coding was done manually, with the AI capabilities largely exaggerated.”
Financial irregularities and misconduct had also been noted, as Builder.ai’s Manpreet Ratia discovered in a leadership shake-up that the company considerably inflated their revenue for 2024, claiming $220 million despite the income leaning closer towards the value of $50 million.
Indian social media startup VerSe was additionally reported to be involved in engaging with Builder.ai’s questionable financial practices. VerSe denied the allegations, with its co-founder Umang Bedi saying the claims were “baseless and false.”
Presently, the exposure has further sparked much talk on transparency and liability in the AI industry, specifically to investors that pursue funding towards language models and automation technologies.
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