Once hailed as India’s answer to Silicon Valley’s AI surge, Builder.ai’s story has taken a sharp and shocking turn. The artificial intelligence startup — founded by Sachin Dev Duggal in 2012 and backed by heavyweight investors including Microsoft, Qatar Investment Authority, and SoftBank — has filed for bankruptcy following a dramatic financial collapse.
Despite being valued at nearly $1 billion and having raised over $450 million in funding, the company now finds itself with a mere $5 million left in the bank, most of which is locked in Indian accounts due to regulatory restrictions.
The $37 Million Blow: What Triggered the Meltdown?
The immediate cause of Builder.ai’s collapse was a $37 million fund seizure by Viola Credit, a lender that had extended a $50 million debt facility to the company in 2023. According to CEO Manpreet Ratia, this move left the company effectively crippled, with only $5 million in operational funds — none of which could be used to pay employees due to cross-border capital controls.
“Despite the tireless efforts of our team… the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position,” the company stated.
Builder.ai has since laid off the majority of its workforce, with operations grinding to a halt and financial audits hinting at deeper issues.
Smoke and Mirrors? The Longstanding AI Controversy
Builder.ai — previously known as Engineer.ai — was built around the promise of AI-powered app development that allowed customers to create software with little to no coding knowledge. But in 2019, The Wall Street Journal reported that most of the code was actually written by human engineers, not AI tools. This raised serious questions about the startup’s core tech narrative.
While the company insisted it was working toward full automation, the controversy cast a long shadow. Internal sources later revealed that Builder.ai routinely overstated its sales figures by over 20%, and cut its projected revenue for the second half of 2024 by 25%, as reported by Bloomberg.
Cracks in the Foundation: Governance and Financial Missteps
Signs of trouble were brewing well before the Viola Credit issue. Builder.ai reportedly engaged auditors to examine its financial statements — a move that often signals potential irregularities. Several former employees have alleged inconsistent financial reporting, mismanagement, and unrealistic growth expectations.
This combination of governance issues, questionable transparency, and overhyped tech capabilities proved fatal when the financial cushion dried up.
A Blow to India’s AI and Startup Credibility?
Builder.ai’s collapse comes at a time when India’s AI ecosystem is gaining international attention, but also facing increased scrutiny. In the past two years, over 28,000 Indian startups have shut down — many due to weak business models, poor governance, or premature scaling.
The spectacular fall of Builder.ai is a cautionary tale for both founders and investors: lofty valuations, high-profile backers, and slick marketing can’t replace solid fundamentals and transparent leadership.
It also sends a chill down the spine of India’s AI sector — one already contending with investor skepticism and global competition. The fear is that Builder.ai’s demise may dampen enthusiasm and slow funding for other promising AI startups from the region.
Lessons for the Ecosystem: Hype ≠ Value
In the race to find “the next OpenAI,” investors have often poured massive funds into startups still figuring out their value proposition. Builder.ai’s case shows what can go wrong when ambition outpaces ability, and when AI branding masks operational fragility.
As the Indian startup ecosystem recalibrates in 2025, Builder.ai will likely be remembered not just as a failure — but as a wake-up call. For founders, it’s a reminder to focus on sustainable growth. For investors, it’s proof that not all billion-dollar dreams are built on stable foundations.
Credits: Inc 42
Conclusion:
Builder.ai’s story isn’t just about one startup’s collapse — it’s about the broader health of a rapidly evolving tech landscape. And it’s a reminder that in the world of AI, clarity, accountability, and realism are just as important as innovation.
