Builder.ai, a London startup once backed by Microsoft, has entered insolvency proceedings. This comes after revelations that its no-code development platform was not powered by AI, but by 700 human engineers in India. The company had marketed its platform as driven by an AI assistant called “Natasha.” However, reports showed that customer requests were manually fulfilled by developers.
Ebern Finance founder Bernhard Engelbrecht said, “Customer requests were sent to the Indian office, where 700 Indians wrote code instead of AI.”
Builder.ai’s troubles began when lender Viola Credit seized $37 million from its accounts in 2023. The startup defaulted on a $50 million loan. This crippled the company’s ability to operate or pay employees.
Additional funds in India remain frozen due to regulations. The company has entered formal insolvency proceedings in the UK. A court-appointed administrator is exploring asset recovery and business salvage options.
In a LinkedIn statement, Builder.ai acknowledged its “early missteps” had pushed it “beyond recovery.”
VerSe Innovation’s name has surfaced due to its business ties with Builder.ai, which began around 2021. However, VerSe co-founder Umang Bedi denied any role in financial misconduct. In an interview, Bedi called the allegations “absolutely baseless and false.”
Builder.ai had 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 from investors like Microsoft, the World Bank’s IFC, Jeffrey Katzenberg’s WndrCo, Lakestar, and SoftBank’s DeepCore incubator.
Builder.ai enters insolvency proceedings
In May 2023, Microsoft made an equity investment and planned to integrate Builder.ai’s platform with its own Azure and AI services.
However, recent developments signaled deeper challenges within the company’s operations. Less than two months ago, Builder.ai 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.
The turning point came when Viola Credit seized $37 million from its accounts, leaving Builder.ai unable to meet payroll or continue core operations. The remaining funds, located in Indian accounts, are restricted due to regulations. Builder.ai and Dailyhunt’s parent company, VerSe Innovation, have also been accused of engaging in “round-tripping” to artificially inflate their revenue figures from 2021 to 2024.
This fraudulent practice involves transferring money between companies without any genuine exchange of goods or services. VerSe Innovation issued a statement acknowledging the ongoing investigation while maintaining that they are cooperating fully with authorities to resolve the matter. They also mentioned initiating internal audits to prevent such discrepancies in the future.
The scandal has had immediate effects, including job cuts at both companies. Builder.ai has already reduced its workforce, and it is expected that VerSe Innovation will follow suit in the coming months as they attempt to stabilize their finances. The round-tripping scandal underscores the importance of transparency and accountability in corporate financial practices. The outcome of the ongoing investigations could have far-reaching implications for investor confidence in the broader tech startup ecosystem.
Senior Software Engineer with a passion for building practical, user-centric applications. He specializes in full-stack development with a strong focus on crafting elegant, performant interfaces and scalable backend solutions. With experience leading teams and delivering robust, end-to-end products, he thrives on solving complex problems through clean and efficient code.
