Artificial Intelligence

Why Microsoft-Backed AI Start-Up 'Builder.ai' Is Going Bankrupt - Read Here

Microsoft-backed Builder.ai is reportedly preparing to file for bankruptcy after a major creditor withdrew most of its funds. The AI startup, once valued at $1 billion, faced ongoing financial struggles, workforce cuts, and regulatory hurdles that it ultimately could not overcome

Why Microsoft-Backed Start-Up Builder.ai Is Going Bankrupt - Read Here
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Microsoft-backed AI start-up Builder.ai is reportedly filing for bankruptcy after a creditor had taken the majority of its funds. The British start-up, founded by Indian entrepreneurs and supported by Qatar Investment Authority (QIA), was not able to recover from its previous financial strain.

“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 company said in an official statement.

What’s Behind The Collapse?

Builder.ai chief executive Manpreet Ratia told Bloomberg that Viola Credit had extended $50 million in debt to the company last year. However, the creditor withdrew $37 million from Builder.ai’s accounts and left $5 million in the company. The company will begin bankruptcy proceedings in each market (India, Singapore, UAE, US, and UK) on local legal frameworks.

He did not disclose the reason behind the seizure. Amid a severe liquidity crunch, Builder.ai was forced to lay off the majority of its workforce. While $5 million remains in the company’s Indian bank accounts, Ratia explained that restrictions on outward remittances prevent the use of these funds to pay overseas employees.

How It Started?

It all started in 2019 when The Wall Street Journal disclosed that Builder.ai did coding with the help of human engineers, not artificial intelligence. This was in contradiction with the company’s core claim of using AI tools to enable clients to build and develop applications. And the use of auditors to examine its financial records indicated that there can be some problem in the company.

Ex-employees, as quoted by Bloomberg, stated that Builder.ai has repeatedly overstated sales estimates by over 20%, and reduced its revenue by 25% for the second half of 2024.

Founded in 2012 by Sachin Dev Duggal, the start-up gained attention for its AI-driven platform designed to simplify the creation of websites and apps. At its peak, it was reportedly valued at around $1 billion and had secured more than $450 million in funding.

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