Microsoft-backed AI startup Builder.ai is entering insolvency proceedings after a major creditor seized most of its cash, the company announced Tuesday.
The London-based firm, once valued at over $1 billion, marketed itself with the tagline of making software development “as easy as ordering pizza” but now faces bankruptcy in all five countries where it operates.
In its official statement released Tuesday, the company acknowledged: “Despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position.”
The statement continued: “Our immediate priority is to support our employees, customers, and partners through this difficult time. We will work closely with the appointed administrators to ensure an orderly process and to explore all available options for parts of the business, where possible.”
According to court documents reviewed by Bloomberg, Viola Credit, which provided a $50 million debt line to Builder.ai last year, seized $37 million from company accounts, leaving just $5 million in accessible funds. CEO Manpreet Ratia disclosed this information during a company-wide call Tuesday.
Financial records show Builder.ai owes $85 million to Amazon and $30 million to Microsoft, as reported by the Financial Times. The company has been operating with effectively no funds in its UK and US bank accounts in recent days, according to people familiar with the matter.
When Ratia attempted to transfer remaining money from a Singaporean bank account to pay employee wages, creditors seized those funds too, making the company unable to meet payroll obligations in the US or UK, sources confirmed to the Financial Times.
The insolvency dramatically reverses the fortunes of a company that attracted approximately $450 million from investors since its founding in 2016. Microsoft, Qatar Investment Authority, Kuwait Investment Authority, Hong Kong-based Boyu Capital, and Hollywood mogul Jeffrey Katzenberg’s WndrCo all backed the once-promising startup.
Builder.ai revealed financial reporting irregularities earlier this year when it significantly adjusted its financial statements, declaring $140 million in 2023 revenue — substantially less than previously reported figures, though it did not disclose the original amount. The company simultaneously cut its expected earnings projections for the latter half of 2024 by roughly 25%, financial news sources confirmed.
Former staff members told Bloomberg in separate interviews that the company had artificially boosted its sales numbers by over a fifth in several instances.
Founder Sachin Dev Duggal stepped down as CEO earlier this year, replaced by Ratia, a managing partner at Jungle Ventures. The company also reduced its board from nine to five seats and asked Duggal to relinquish four of the five seats he controlled, according to sources familiar with the changes.
An investigation by the Financial Times last year revealed that Duggal had been identified by Indian authorities as part of an ongoing money-laundering probe. Duggal has maintained his innocence. His representatives insist he was only questioned as a witness in the investigation.
And then there was also the issue about the company’s actual technological capabilities. A 2019 Wall Street Journal investigation found discrepancies between the company’s public AI automation claims and its actual operations. While marketing itself as using artificial intelligence to build apps automatically, the company was reportedly relying significantly on manual work by developers, according to sources cited in the Journal’s reporting.
Builder.ai will now work with court-appointed administrators in the UK, US, India, United Arab Emirates, and Singapore to explore options for salvaging parts of the business.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
