After deceiving investors for 8 years, this AI unicorn went bankrupt

Another absurd scene happened in the global venture capital circle.

In May 2025, the once glorious Indian AI unicorn Builder.ai officially entered the bankruptcy liquidation procedure, and its valuation of $1.6 billion dropped to zero overnight, shocking the global technology and investment circles.

The story of Builder.ai can be called a carefully woven "scam". The founder Duggal is a "technical prodigy" who graduated from Imperial College London. The company's early promotion of "AI automatic code generation" technology, combined with a carefully designed demo demonstration, made the market crazy.

With its highly contagious speeches and Silicon Valley-style entrepreneurial narratives, it also attracted top capital such as Softbank, Microsoft, and Qatar Investment Authority to bet wildly, and its valuation soared to $1.6 billion. The strategic cooperation with Microsoft also helped it become a star company in the AI ​​low-code track.

But in fact, Builder.ai is a fake AI company that is "all artificial and no intelligence". The company hired a group of Indian guys to pretend to be AI and write code. Its AI assistant "Natasha" was just a marketing gimmick. The company also fabricated revenue data to deceive investors. And this deception lasted for 8 years.

It's not that no one has revealed the truth during this period, but investors chose to turn a blind eye. In 2019, the Wall Street Journal published an article to expose its fake AI, but the capital market was obviously overwhelmed by the narrative of the "AI revolution", and its financing process was not affected at all. It was not until the company's financial fraud was exposed in 2024 that the company's cash flow was broken and it finally went bankrupt.

The Financial Times has a very appropriate comment: When capital chases narratives, the truth often becomes a supporting role.

The once-glorious AI unicorn

Builder.ai was founded in London in 2016 by Indian engineer Sachin Dev Duggal. Duggal graduated from Imperial College London and was active in Silicon Valley as a "technical prodigy" in his early years:

At the age of 14, he started his career by assembling PC computers; at the age of 17, he created one of the world's first automated currency arbitrage trading systems for Deutsche Bank; at the age of 21, while still studying at Imperial College London, he started the cloud computing company Nivio, and left after the company was valued at $1, and created another photo-sharing app called Shoto, and then founded Builder.ai.

Duggal is known for his good speeches and capital operations, and is called the "Musk of AI" by the media, but his radical style does lay hidden dangers for future entrepreneurship. His partner Saurabh Dhoot also has a technical background. The two initially named the company Engineer.ai, inspired by Duggal's experience at Delhi University. He claimed to have witnessed the difficulties of non-technical backgrounds in developing apps and was determined to create an AI platform for "natural language to code". In early publicity, Duggal likened this process to "ordering pizza" - users only need to describe their needs, and AI can automatically generate a complete application.

The company initially positioned itself as a service provider for small and medium-sized enterprises, focusing on the low-code development platform Builder Studio, and using the fictitious AI assistant "Natasha" as the core technology. Its marketing strategy is very impactful. In terms of visual packaging, it established a leading technology image through cool demos and rhetoric, and then enhanced its credibility by claiming to cooperate with BBC and JP Morgan, but in fact it only provided templates.

With the halo of a child prodigy, excellent academic qualifications and continuous entrepreneurship, venture capital will naturally not miss such entrepreneurs. Builder.ai quickly obtained financing, and the entire investment team is luxurious.

In 2018, SoftBank DeepCore invested $29.5 million in the A round of financing, becoming one of the largest A rounds in Europe. Other investors include Zurich-based venture capital firm Lakestar (an early investor in Facebook Inc. and Airbnb Inc.) and Singapore-based Jungle Ventures.

According to people familiar with the matter, the core part of the "AI code generation" in the demo at the time was actually a pre-recorded video. However, SoftBank claimed that the reason for the investment was not the technology itself, but the story potential of its "AI democratization".

In 2022, Builder.ai successfully won $195 million in Series B financing. During the financing period, the company also lied that it was working with Nvidia to develop the "world's largest code data set", but in fact it only purchased the authorization of GitHub, misleading investors into believing that it had an exclusive technical partnership.

This capital game reached its peak in 2023. The $250 million Series D financing led by the Qatar Investment Authority increased its valuation by 1.8 times to $1.6 billion. In the same year, Builder.ai also claimed to be deeply integrated with the Microsoft Azure ecosystem, and Microsoft Vice President Jon Tinter praised it for "creating a new category."

All of the above endorsements are further pushing up market expectations. Even more ironic is that in the same year, the AI ​​technology white paper published by Microsoft Research clearly pointed out: "There are still fundamental technical barriers to directly generating complex business applications from natural language." But the market's enthusiasm can no longer accommodate rational voices.

How did things fail?

The turning point of things came in the spring of 2024.

In March 2024, Builder.ai's internal audit found that the company's 2023 revenue was overstated by 20%-25%, and its 2024 revenue forecast was subsequently lowered from $220 million to $55 million. This sharp reduction indicates that the company has problems with revenue.

Things have been going downhill since February 2025, when Sachin Dev Duggal stepped down as CEO due to financial fraud and involvement in an Indian money laundering investigation. Two months later, Viola Credit, one of Builder.ai's senior investors, seized $37 million from the company's account and triggered a default.

Manpreet Ratia, who took over the mess, is a former executive of Amazon and Flipkart. He previously served as managing partner of Jungle Ventures, an investor in Builder.ai. At this time, Manpreet Ratia had only $5 million in cash left and could not pay salaries, and officially declared the company bankrupt on May 20.

A month before declaring bankruptcy, the company also carried out a last-minute reorganization, laying off 220 of its 770 employees. After bankruptcy liquidation, Builder.ai still owed Amazon $85 million and Microsoft $30 million.

After bankruptcy, public opinion surrounding Builder.ai began to rage. The information that had been exposed since 2019 has been known to more people.

Several former employees revealed that the company had false propaganda problems as early as 2019. Its so-called "AI-driven" was just a gimmick, and the company did not even have a truly professional AI R&D team. The AI-generated interface that users see on the platform is actually completed by engineers in low-cost regions such as India who worked overtime to manually write code.

The company claimed to cooperate with large companies such as BBC and JP Morgan in the early days, but actually only provided templates, but lied about deep cooperation to attract customers and investors.

On the one hand, it attracted customers with low prices, and on the other hand, it relied on high-cost manual development, resulting in an unreasonable cost structure for the company. In 2023, its revenue was $210 million, but its loss was $430 million.

In order to cover up financial data, several former employees accused the company of repeatedly falsely reporting sales, which was more than 20% higher than the actual order volume. They also said that the company falsely reported up to 300% of revenue to investors. These factors intertwined and eventually made Builder.ai's financial fraud exposed to the world.

Surprisingly, why did the scam take 8 years to be discovered?

This may be inseparable from the auditing agency. Because the company has long relied on auditing agencies with close ties to the founder to handle accounts, it concealed the true financial situation, and this opaque operation also made it difficult for financial fraud to be discovered in time. In 2025, the U.S. Attorney's Office for the Southern District of New York launched a criminal investigation into Builder.ai. The subpoena it issued showed that the investigation focused on the company's publicly announced sales data, which further revealed its financial fraud to the public.

Not an isolated case

In the venture capital circle where hot money is surging, sand and gold always appear in similar faces, making it difficult to see clearly. Builder.ai's scam is not an isolated case. It is even called the AI ​​version of "Theranos".

The Theranos case was also a sensation. In 2003, Elizabeth Holmes, a 19-year-old chemical engineering student at Stanford University, dropped out to found Theranos, claiming to subvert the traditional blood testing industry. She proposed a revolutionary concept: with just a few drops of blood from the fingertips, more than 200 tests, including cancer screening and diabetes monitoring, can be completed within 4 hours through the portable device "Edison". This vision quickly attracted capital enthusiasm - Oracle founder Larry Ellison, former Secretary of State Kissinger and other political and business celebrities became board members, the company's valuation soared to US$9 billion in 2014, and Holmes herself became the world's youngest self-made female billionaire.

In October 2015, the Wall Street Journal published a series of investigative reports, exposing the fraud of Theranos' core technology. As the investigation deepened, Theranos accelerated its collapse, and its valuation eventually plummeted to US$800 million. It was sentenced to 11 years and 3 months in prison, becoming the protagonist of the largest corporate accounting scandal in Silicon Valley history.

Similar scams include the German payment giant "Wirecard" fabricating 2 billion euros in revenue and eventually collapsing in 2020; DoNotPay lied about the "AI lawyer" function and was fined $190,000 by the SEC. These cases all use false technical or financial means to create a bright development prospect and deceive investors and customers.

The collapse of Builder.ai also exposed the contradictions in the AI ​​investment boom. According to Crunchbase statistics, the global AI financing amount increased by 470% between 2020 and 2024, but the success rate of technology commercialization only increased by 9% during the same period. This imbalance has given rise to the "narrative-driven investment" model. Like Theranos, Builder.ai packaged the technological vision into a quantifiable business miracle, attracting investors.

Moreover, in the grand narrative of technology, the selective blindness of investors is vividly demonstrated in this incident. Although the 2019 investigative report of the Wall Street Journal revealed the truth about manual code writing, institutional investors such as SoftBank and Microsoft have increased their investment efforts. Behind this abnormal behavior is the industry-wide FOMO plot. Previously, a McKinsey research report showed that 73% of investors admitted that they had lowered their risk assessment standards for fear of missing out.

Lack of supervision also provides a breeding ground for bubbles. Although the EU's "Artificial Intelligence Act" will take effect in 2023, its "technical neutrality" principle makes the gray area between Demo demonstrations and actual products lack supervision. When Builder.ai claimed that "AI generated code with an accuracy rate of 92%", the regulatory authorities had neither the ability nor the motivation to verify the authenticity of the technology. This regulatory lag was also evident in the Wirecard financial fraud case. It was not until the 2 billion euros of false transactions were exposed that the German Federal Financial Supervisory Authority launched an investigation.

The bankruptcy and liquidation of Builder.ai is like a mirror, reflecting the problems and challenges faced by the AI ​​industry in its rapid development. This can also be seen as a profound warning to the current AI craze.