Builder.ai’s tagline was “so easy, anyone can do it”. It had an AI-powered assembly line that promised to build software quickly and cheaply. The startup’s beginning was like finding a unicorn and it’s insolvency in 2025 reveals a stark gap between its grand claims and reality.
Builder.ai’s Fall From Unicorn to Insolvent: What Went Wrong?
Before the we dive into the founding of Builder.ai, let’s do a quick recap. In 2012, Sachin Dev Duggal founded a software venture which was originally called SD Squared. Which eventually evolved into Engineer.ai. A startup that promised to revolutionize and transform app development using AI. The company claimed building a custom app would be as easy as ordering pizza. With AI assembling code from reusable parts.
But, unfortunately what was told was not happening behind the scenes. Most of the development work was not done by AI, but was manually done by humans. Subsequently after this in 2019, Wall Street Journal’s report exposed the same. To rebrand and recover, Engineer.ai became Builder.ai in 2020. A name which was a name meant to emphasize building solutions for customers’ ideas rather than just providing engineers, which was quite smartly put in my opinion.
Despite having a rocky start, Builder.ai actually soared. As reported by Techcrunch, it raised over $450 million that too from big names like Microsoft, Qatar Investment Authority, and Insight Partners. Additionally, by 2023, it was a unicorn valued at over $1.2 billion. Furthermore, it had thousands of employees and offices across various countries.
But in 2025, everything came crashing down.
The Dream That Sold
Builder.ai pitched a dream that won hearts. It promised us a a future where literally anyone could build apps with absolutely no coding skills. It had a “human assisted- AI” platform, to speed up delivery and reduce costs. As reported by Insights Partner, it claimed and promised that the app development was “six times faster and 70% cheaper.” The idea sounded strong and that’s why it attracted big investors too.
The Red Flags
On the surface there were flashy funding rounds, but despite that it burned through cash. In 2024 when the year was ending it raised a debt facility of $50 million to just stay afloat. A MAJOR RED FLAG for a company claiming and projecting massive growth. As a result of this, internally, some of the employees began noticing inconsistencies in reported and projected revenue.
And the biggest shock was when the audit in the beginning this year revealed the truth that Builder.ai had vastly inflated its revenue figures. It claimed over $200 million in revenue while in reality it was just close to $55 million. Sales were overstated, some clients never even existed, all of this pointed towards a possible fraud.
Whistleblowers and Consequences
When the internal audit gained momentum, the whistleblowers came forward. Shocking revelations were made- claimed sales figures were exaggerated by up to 300% in some quarters. Obviously, this caused a lot of enragement in the investors, they were furious and removed Sachin Duggal from his CEO post. Additionally, they brought in Manpreet Ratia, who slashed jobs ( upto 35%) and sought emergency funding.
But it was already too late.
Builder.ai had violated various debt agreements. Lenders with no other solution, seized over $37 million in remaining cash of the company and effectively shut down the company overnight. The company was left with no funds to operate and a result of which Builder.ai filed for insolvency in May 2025.
The Possible Repercussions
- The Legal Fallout– In India, where Builder.ai had it operations, IBC, 2016 may apply. Under Sec 10 of IBC, 2016, a company can file for insolvency voluntarily. And if wrongdoing is proven, under Sec 66, directors can be held personally liable for fraudulent activity. All of which means the investigation could stretch far beyond bankruptcy.
- The Human Cost– The employees were blindsided, hundreds of them lost their jobs in a few hours. One can’t even imagine to show up to work only to learn the company has shut down and has no funds.
What Can Startups Learn?
1. Don’t fake it till you break it.
Transparency is the key and is essential. Builder.ai’s inflated metrics may have helped them secure massive amount of funding, but it eventually ended up destroying trust.
2. AI hype isn’t a substitute for delivery.
Just selling a futuristic vision is not enough, you must deliver it. What are words without actions? Overpromising what AI could do led to Builder.ai’s credibility collapse.
3. Burn control beats burn rate.
The most important lesson would be to learn how to balance growth with sustainability. The startup raised over $450M but ran out of cash.
4. Strong governance matters.
It all comes down to governance. Had the investors or board members asked the right questions earlier, this whole collapse may have been avoided.
5. Prepare for the worst.
You need to have alternative plans. For when things go south or not as planned. The lenders swept the company’s bank accounts and as a result Builder.ai had no fallback.
If you’re exploring what startup collapses can teach us, don’t miss BluSmart’s story of ambition, EV innovation, and sudden shutdown. It’s another reminder that bold ideas need strong foundations.
