https://x.com/deedydas/status/1929931089113698585
The London-based startup Builder.ai, once valued at over a billion dollars and backed by Microsoft, has collapsed amid revelations that it deceived investors and customers about its AI capabilities. For years, the company claimed its advanced artificial intelligence system could handle complex software development tasks. However, investigations revealed that instead of using sophisticated AI algorithms, Builder.ai relied on a team of 700 engineers in India to manually execute projects marketed as automated.
https://x.com/balzarot/status/1930535242151919790
Engineers in Noida and Bangalore were instructed to mimic AI-generated responses and time their work to UK business hours to maintain the illusion. “We were told to never mention our location or use Indian English phrases,” a former Bangalore engineer said. The deception unraveled in April 2025 when reports exposed a round-tripping scheme with Indian firm VerSe Innovation, artificially inflating Builder.ai’s revenue by up to 300 percent.
Audits later showed 2024 revenues were just $55 million, far below the $220 million projected to investors.
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Microsoft’s $455 million investment in 2023, including plans to integrate Builder.ai’s technology with Azure, now stands as a cautionary tale. The partnership fell apart when creditors seized funds after uncovering inflated financials.
US authorities have subpoenaed records as part of a probe into potential securities fraud.
Collapse amid ai deception
The SEC is also investigating whether Builder.ai misrepresented its capabilities to investors.
Internal messages show executives directing staff to “minimize visibility” of human labor. Founder Sachin Dev Duggal, self-styled “Chief Wizard,” resigned as CEO in February 2025 amid mounting losses. His replacement disclosed layoffs of about 1,000 employees, 80 percent of its global workforce.
The insolvency marks a significant failure in the AI startup space, underscoring growing scrutiny of “AI washing” across the tech sector. It raises broader concerns about oversight and ethics in the industry. The scandal has damaged the company’s reputation and left employees and investors in a precarious situation.
Experts point to factors like aggressive expansion without a sustainable model and lack of clear strategic direction as contributing to the downfall. The collapse serves as a cautionary tale about the risks of rapid growth and the importance of robust management in tech ventures. It highlights the need for startups to balance innovation with sustainable practices to ensure long-term viability over fleeting success.
Deanna Ritchie is a managing editor at DevX. She has a degree in English Literature. She has written 2000+ articles on getting out of debt and mastering your finances. She has edited over 60,000 articles in her life. She has a passion for helping writers inspire others through their words. Deanna has also been an editor at Entrepreneur Magazine and ReadWrite.
