Builder.ai, the British no-code AI startup once celebrated for its strategic partnership with Microsoft MSFT and a $250 million raise led by the Qatar Investment Authority, announced Tuesday that it is filing for bankruptcy protection.
According to Bloomberg, the dramatic fall comes after a major lender, Viola Credit, seized $37 million from the company's accounts, leaving just $5 million in restricted funds, effectively paralyzing operations across five countries.
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CEO Manpreet Ratia replaced founder Sachin Dev Duggal earlier this year in a boardroom shake-up aimed at restoring investor confidence. Ratia said that most of the company's employees have been laid off and that Builder.ai will now begin bankruptcy filings in each of its operational jurisdictions, including the U.K., U.S., UAE, Singapore, and India, Bloomberg reports.
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Builder.ai Raised $450M Backed by Microsoft, QIA, and WndrCo
Founded in 2016, Builder.ai positioned itself as a revolutionary tool for businesses to build custom apps using AI with minimal coding. It raised over $450 million in total funding, attracting marquee investors like Microsoft, the World Bank's IFC, Jeffrey Katzenberg's WndrCo, Lakestar, and SoftBank's DeepCore incubator, Bloomberg reports. In May 2023, Microsoft made an equity investment and announced plans to integrate Builder.ai's platform with its own Azure and AI services.
Builder.ai offered a platform that allowed businesses to create custom smartphone apps with little or no coding, aiming to simplify and accelerate the app development process. The company positioned itself as a no-code AI solution, gaining attention during the surge of interest in generative AI, Bloomberg says. However, recent developments signaled deeper challenges within the company's operations.
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Less than two months ago, Builder.ai confirmed it had revised down key sales figures and appointed auditors to examine financials from the past two years. Former employees raised concerns that sales performance had been inflated in previous investor briefings. According to Bloomberg, these allegations triggered a domino effect of investor caution, internal restructuring, and eventual loss of confidence.
Investor Hype Meets Harsh Reality
The turning point came when Viola Credit, which had lent the company $50 million in 2023, seized $37 million from its accounts, leaving Builder.ai unable to meet payroll obligations or continue core operations. The remaining funds, located in Indian accounts, are restricted due to regulatory limitations, Ratia told Bloomberg.
The insolvency proceedings reflect a growing wave of AI startup turbulence. Phil Brunkard, executive counselor at Info-Tech Research Group, told Computer World that many AI firms rushed to scale on the back of hype, often lacking strong financial controls or truly differentiated offerings.
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Bankruptcy Across Borders: A Global Unraveling
Builder.ai's situation is complicated by its international footprint, Bloomberg reports. Insolvency laws differ across the five regions where it operates, with the U.K. process involving the appointment of a court-approved administrator.
The company said in the LinkedIn statement that it will work closely with administrators to explore options for salvaging parts of the business, while also prioritizing communication with affected employees, customers, and partners.
Builder.ai expressed gratitude to its team and stakeholders in the statement, but acknowledged that past missteps had pushed the company beyond recovery. For a firm once hailed as the future of no-code AI, the collapse may highlight growing scrutiny around startup fundamentals amid the AI investment boom.
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