Builder.ai—the London-headquartered “no-code, AI-powered” app-building platform once valued at US $1.5 billion—has entered insolvency proceedings barely two years after sealing a high-profile strategic deal with Microsoft. The abrupt filing, confirmed in a U.S. bankruptcy court this week, follows creditor Viola Credit’s decision to seize US $37 million from the company’s bank accounts, a move that effectively drained its working capital and left only about US $5 million marooned in India, inaccessible for payroll or operations.economictimes.indiatimes.com
From unicorn to bust in 18 months
Founded in 2016 (originally as Engineer.ai), Builder.ai raised more than US $450 million from Microsoft, Qatar Investment Authority, SoftBank and others. Its last funding round in 2023 pegged the startup’s worth at roughly US $1.5 billion and promised tight integration between its “AI Software Assembly Line” and Microsoft Azure. Yet by May 2025 the company was already appointing administrators after “historic challenges and past decisions” crippled its finances, according to an internal statement seen by TechCrunch.techcrunch.com
Behind the liquidity crunch lay a series of red flags. Former employees alleged that Builder.ai routinely inflated sales forecasts by more than 20 percent; in March the company quietly chopped its FY 2024 revenue guidance by a quarter and hired outside auditors to comb through two years of books.techcrunch.com Investors became jittery, and when Viola Credit—provider of a US $50 million debt facility—invoked a default clause and swept US $37 million out of the startup’s U.K. accounts, management was left with no viable rescue plan.economictimes.indiatimes.com
The AI that wasn’t
Even before the cash seizure, critics had questioned Builder.ai’s core technology. Marketing materials boasted an artificial-intelligence assistant named “Natasha” that could dynamically generate code modules so clients could “order software like pizza.” But a 2019 Wall Street Journal exposé—and fresh reporting this spring—showed that much of the actual coding was performed manually by hundreds of engineers in India, with AI limited to internal quoting and scheduling tools.theregister.com80.lv As 80.lv drily observed, the system was “all humans, no intelligence,” sparking accusations of “AI-washing” across developer forums.80.lv
Mass layoffs and multi-country proceedings
CEO Manpreet Ratia, installed in February after founder Sachin Dev Duggal moved to a ceremonial “chief wizard” role, told Bloomberg that most of Builder.ai’s 1,000-plus staff have now been laid off. The company plans parallel bankruptcy or insolvency filings in the U.K., U.S., India, the UAE and Singapore because the cash freeze left it unable to meet payroll across jurisdictions.economictimes.indiatimes.com Remaining funds in Indian banks cannot be remitted abroad due to local currency regulations, further complicating any restructuring.
Investors and customers left in limbo
Microsoft, which only last year touted Builder.ai as a showcase for Azure-hosted generative-coding workflows, has declined comment. Industry analysts note that Microsoft holds no board seat and ranks behind secured creditors, making recovery of its minority equity stake unlikely. Customers, meanwhile, face uncertainty over source-code escrow and ongoing maintenance of apps built on Builder.ai’s proprietary backend.
A cautionary tale for the AI boom
The collapse underscores growing concern that venture funding is outpacing real technical progress in the generative-AI gold rush. Builder.ai’s downfall mirrors other high-flying startups whose “machine-learning magic” turned out to be human labor behind the curtain. Regulators in the U.K. and India are already probing whether marketing claims crossed the line into deceptive practice, and venture firms are quietly asking portfolio companies to provide third-party audits of any AI claims.
James Govers, a partner at London law firm Ashurst who specialises in tech restructurings, says the case could become a template: “Creditors will look harder at covenants tied to key KPIs such as genuine AI automation percentages. If the tech relies mainly on offshore labour, that’s a service business—valuations should reflect that reality.”
What’s next?
An administrator will now explore asset sales, including Builder.ai’s client list and its partially-built code-library IP. Ratia has hinted that he may pursue a management buy-out if fresh capital emerges, but observers see little appetite amid collapsing trust. For employees and customers, the priority is salvaging data and code before servers go dark.
For the wider startup ecosystem, Builder.ai’s spectacular rise and fall is a stark reminder: branding something “AI” does not magically remove the need for sustainable economics or verifiable technology. In the words of one disgruntled ex-engineer on an internal Slack leak, “It turns out you can’t just prompt your way past payroll or debt covenants.”
