The Fall of Builder.ai: Inflated Revenues, Human Workforce, and the “AI Washing” Controversy

From 'AI-Powered Revolution' to Reality Check: What Was Builder.ai Promising?

Builder.ai burst onto the scene with a bold promise: to democratize software development. They claimed their platform, spearheaded by an AI assistant named "Natasha," could help anyone, even those without coding skills, build complex applications. The tech world is still reeling from the sudden and dramatic collapse of this London-based startup, once valued at a staggering $1.5 billion and backed by giants like Microsoft. Marketed as a revolutionary platform that used artificial intelligence to make app development accessible to everyone, its downfall in recent months, reportedly unfolding through early to mid-2025, has sent shockwaves through the industry. The core of the controversy? Allegations that its sophisticated AI was, in large part, a facade powered by hundreds of human engineers in India, coupled with severe financial misrepresentation. This isn't just a story about a failed startup; it's a cautionary tale about hype, due diligence, and the seductive allure of "AI" in an industry hungry for innovation.

💡 Natasha: The AI Assistant That Wasn't Quite AI

At the heart of Builder.ai's pitch was Natasha, described as an AI-powered project manager. Users would interact with Natasha, outlining their app ideas, and the AI would supposedly translate these concepts into functional software, automating much of the design and coding process. The idea was to make app creation faster, cheaper, and more efficient than traditional development methods.

🍕 'As Easy as Ordering Pizza': The Grand Vision

The company's tagline, "building software is as easy as ordering pizza," captured their ambitious goal. They aimed to simplify the complex, often daunting, process of app development, making it accessible to entrepreneurs, small businesses, and anyone with an idea. This compelling narrative attracted significant attention and, crucially, massive investment, including a strategic partnership and equity from Microsoft and funding from the Qatar Investment Authority. You can still see remnants of their ambitious vision on the Builder.ai company story page, which details their journey and milestones before the recent events.

Cracks in the Facade: How the Builder.ai Story Began to Unravel

Despite the glossy marketing and high-profile backers, whispers of trouble had been circulating for some time. But the situation escalated dramatically in recent months, leading to a full-blown crisis.

🚩 Early Warnings and Lingering Questions

As far back as 2019, reports, including one by The Wall Street Journal, questioned the extent of Builder.ai's reliance on actual AI, suggesting a significant human element was involved. Former employees also came forward with concerns. For instance, Robert Holdheim, a former executive, reportedly sued the company in 2019 for $5 million, alleging he was dismissed after voicing concerns that the technology "did not work as promoted and was essentially nothing more than 'smoke and mirrors'." Court filings from that time even claimed the company told investors apps were "80% built" by AI technology they had "barely even begun to develop."

💸 The Financial Tightrope: Inflated Projections and Mounting Debts

The more immediate catalyst for Builder.ai's collapse appears to be its precarious financial situation. Reports emerged detailing how the company had allegedly provided massively inflated revenue projections to its investors and lenders. Some sources claim 2024 revenue projections were overstated by as much as 300% – promising $220 million in sales to creditors when independent audits later revealed actual revenue closer to $50-55 million. Similar discrepancies were reported for 2023 figures.

Furthermore, allegations of "round-tripping" surfaced, involving Indian social media firm VerSe Innovation. This practice, if true, would mean the two companies exchanged nearly identical invoices for services never rendered, artificially inflating Builder.ai's revenue. VerSe co-founder Umang Bedi has denied these allegations as "baseless."

📉 Viola Credit's Move and the Domino Effect

The unraveling accelerated when Viola Credit, a senior lender that had provided a $50 million credit line in October 2024 (based on the now-disputed revenue projections), reportedly seized $37 million from Builder.ai's accounts in May 2025. This move was apparently triggered by the discovery of the inflated financials and breach of covenant, leaving Builder.ai with a mere $5 million in restricted funds, mostly in Indian accounts and unusable for global operations or salaries. This financial squeeze proved to be the tipping point.

Behind the 'AI': The Human Engine Room

While financial woes were the immediate cause of the collapse, the revelations about Builder.ai's operational model – specifically, its use of human labor marketed as AI – have drawn the most significant attention and criticism.

🧑‍💻 Reports of 700+ Engineers: The 'AI' Unmasked

Multiple reports, citing former employees and investigations, suggest that the "AI-powered" app development was largely carried out by a workforce of over 700 engineers based in India. These human developers were allegedly responsible for the actual coding and development tasks attributed to the "Natasha" AI. Employees reportedly stated that most labor was human-produced, with AI or general software used for some clerical tasks. They even timed updates to UK business hours to maintain the illusion of automation.

🤔 'All Engineer, No AI' – Whistleblower Accounts

The sentiment among some former insiders was stark: "all engineer, no AI." This suggests a fundamental misrepresentation of the company's core technology. Instead of a revolutionary AI, clients were, in essence, interacting with a sophisticated outsourcing operation masked by AI branding.

Builder.ai: Promised vs. Reported Reality

The Implosion: Bankruptcy, Layoffs, and Lingering Liabilities

The culmination of these issues was the company's insolvency.

➡️ Filing for Insolvency: The End of the Road

In May-June 2025, Builder.ai reportedly filed for bankruptcy protection in multiple jurisdictions, including the UK, US, and India. New CEO Manpreet Ratia, who had taken over just two months prior in an attempt to salvage the company, acknowledged the dire situation. In a LinkedIn statement, Builder.ai stated it would be "entering into insolvency proceedings," citing an inability to "recover from historic challenges and past decisions that placed significant strain on its financial position."

💔 The Human Cost: Employees and Clients Left in Limbo

The collapse has had a significant human impact. Reports indicate that over 500, and possibly up to 1,000, employees have lost their jobs globally. Clients who relied on Builder.ai for their app development and maintenance were left scrambling, with projects potentially unfinished.

💰 Debts, Big Tech Backers, and Unanswered Questions (Microsoft & Amazon)

The financial fallout extends to significant debts owed to major tech companies. Builder.ai reportedly owes $85 million to Amazon and $30 million to Microsoft for cloud services. The involvement of such sophisticated investors as Microsoft and the Qatar Investment Authority raises serious questions about the level of due diligence performed. How did these giants miss the red flags? Prosecutors in New York are now reportedly requesting customer and financial documents as a federal investigation in the United States gets underway.

'AI Washing': A Sobering Lesson for the Tech World

The Builder.ai saga is being widely cited as a textbook case of "AI washing."

🧐 What is AI Washing and Why Does it Matter?

AI washing is the practice of companies exaggerating or falsifying their AI capabilities to attract investment, talent, and customers. It's akin to "greenwashing" in the environmental space. Forbes contributor Conor Cawley described it as "painting 'go faster' stripes on a car without upgrading the engine." This practice misleads stakeholders and can erode trust in genuine AI innovation.

Linas Beliūnas of Zero Hash bluntly stated on LinkedIn: "It turns out the company had no AI and instead was just a group of Indian developers pretending to write code as AI."

A Tale of Hype vs. Reality

The intense excitement surrounding artificial intelligence has created an environment where simply associating a product or service with "AI" can significantly boost its perceived value. Builder.ai appears to have capitalized on this hype, but the reality couldn't sustain the illusion. This incident underscores the critical need for skepticism and rigorous validation of AI claims.

Expert Perspectives: Due Diligence and the Seduction of Hype

Industry observers have weighed in on the Builder.ai collapse, highlighting broader issues within the tech investment landscape.

🗣️ Voices from the Industry: Skepticism and Caution

Carrie Osman, CEO of private equity advisor Cruxy, commented that Builder.ai's downfall is an example of "FOMO investing" (Fear Of Missing Out), where hype trumps hard evidence. She noted, "Technology like GenAI has been massively overhyped and investors are under pressure to back the next big thing—often without sufficient scrutiny. In Builder.ai's case, the tech and sales numbers were hugely exaggerated."

Phil Brunkard, Principal Analyst at Info-Tech Research Group, remarked, "Many of these so-called AI firms scaled on narrative, not infrastructure. They lacked the technical backbone or governance to deliver on what they promised.”

The Investor's Dilemma: Spotting Real AI from Clever Marketing

For investors, distinguishing genuine AI breakthroughs from clever marketing ploys is becoming increasingly challenging. The Builder.ai case emphasizes the necessity of deep technical due diligence, going beyond surface-level presentations and questioning the underlying technology.

📌 Key questions investors might ask:

• ✅ Can the company demonstrate a working, scalable AI model?
• ✅ What proportion of the workflow is genuinely automated by AI versus human intervention?
• ✅ Are the revenue models and projections realistic and verifiable?
• ⛔️ Are there independent validations of the technology's capabilities?

Where Do We Go From Here? Rebuilding Trust in AI Innovation

The Builder.ai scandal, while damaging, could serve as a crucial turning point for the AI industry.

🔍 The Scrutiny Intensifies: Calls for Transparency and Accountability

Expect increased scrutiny of AI claims from investors, regulators, and the public. There will likely be stronger calls for transparency in how AI systems are built and operate, and greater accountability for companies that mislead. This incident may push for clearer standards and definitions of what constitutes "AI-powered."

Mohit Gupta, CEO of Damco Solutions, writing for Forbes (though not directly about Builder.ai, his comments on AI are relevant), emphasized AI as an "amplifier of human potential," not a wholesale replacement. He noted, "The silent revolution of AI-assisted development is not about replacing engineers but about augmenting their abilities." This perspective highlights the ethical tightrope companies walk when representing human augmentation as full automation.

🌱 The Future of Low-Code/No-Code After Builder.ai

The collapse of Builder.ai could cast a temporary shadow over the legitimate low-code/no-code market. However, this sector remains resilient, driven by genuine technological advancements that empower users to build applications with minimal traditional coding. The key difference lies in honest representation and a solid technological foundation. Companies that are transparent about their capabilities and deliver real value are likely to thrive. Gartner, for instance, projects that 60% of new enterprise apps will be developed using such platforms by 2028.

Reflecting on the Rubble: Key Takeaways from the Builder.ai Saga

The story of Builder.ai is a multifaceted drama encompassing ambitious vision, alleged deception, financial acrobatics, and ultimately, a spectacular crash. It serves as a stark reminder that:

• 🚀 Hype is not a substitute for substance. AI is a powerful technology, but its label alone cannot guarantee success or mask fundamental flaws.
• 🤔 Due diligence is paramount. Investors, partners, and customers need to look beyond the marketing and critically assess the technology and business model.
• Transparency and ethical representation are crucial for building long-term trust in the AI industry.

As the dust settles on the Builder.ai collapse, the lessons learned will hopefully contribute to a more mature, discerning, and ultimately, more trustworthy AI ecosystem. The promise of AI is immense, but realizing that promise requires honesty, rigor, and a clear-eyed view of what is truly artificial intelligence and what is simply age-old human endeavor dressed in new clothes.