$1.5B AI Startup Crashes After Revelation It Was Just Humans All Along

It started with a $50 million loan and ended with a $1.5 billion AI “unicorn” going into liquidation, because the whole thing was allegedly powered by people instead of bots.

Builder.ai’s collapse has a nasty paper trail: in 2023, lender Viola Credit reportedly yanked $37 million from a loan, leaving only $5 million in restricted funds, while auditors were brought in less than two months ago after employees flagged inflated sales numbers during investor meetings.

Then the story got even weirder, with a director from Zero Hash claiming their “AI backend” was really 700 employees simulating AI behavior.

The company is now in liquidation.

According to Bloomberg, the company’s downfall began when one of its main lenders, Viola Credit, withdrew $37 million from a $50 million loan in 2023, leaving Builder.ai with only $5 million in restricted funds. This financial blow made it impossible for the company to keep up with payroll or manage day-to-day operations.

On top of that, auditors were brought in less than two months ago to examine the company’s finances after employees raised concerns about inflated sales figures presented during investor meetings. This scrutiny only added to the company’s troubles.

Earlier this year, Manpreet Ratia took over as CEO from founder Sachin Dev Duggal. Ratia revealed that most of the workforce had been laid off by then, signaling deep problems within the company.

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Sachin Dev Duggal, the company’s former CEO

The truth about Builder.ai’s operations came to light when Linas Beliūnas, director at the financial company Zero Hash, shared findings that the company’s supposed AI was actually a group of human developers pretending to be AI bots.

"Wild: $1.5 billion AI unicorn just collapsed as it turns out their 'AI backend' was just Indian developers pretending to write code," Beliūnas wrote on LinkedIn.

He went further to accuse Duggal of "reporting fake revenue to investors" and expressed disbelief that the company managed to maintain this charade for eight years.

"The Qatar Investment Authority (QIA) is one of the biggest losers in this saga. They led a $250 million funding round two years ago," he added.Getty Images

Instead of actual bots, the company had 700 employees simulating AI behavior.

Following the collapse, Builder.ai plans to file for bankruptcy in all the countries where it operates, including the US, UK, Singapore, UAE, and India. In a statement, Builder.ai said:

"Despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position."

The company also promised to prioritize support for its employees, customers, and partners during this difficult time.

"We will work closely with the appointed administrators to ensure an orderly process and to explore all available options for parts of the business, where possible," the statement said.

It concluded by thanking the people who had been part of Builder.ai’s journey:

"We want to extend our sincere gratitude to our employees for their commitment and hard work, to our customers for their loyalty, and to our partners and suppliers for their support over the years."Instagram

The loan shock hit in 2023, when Viola Credit pulled $37 million and Builder.ai was left scrambling with just $5 million in restricted funds.

Auditors stepped in after employees raised concerns that investor decks were selling inflated sales, and that scrutiny made everything harder to breathe through.

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When Manpreet Ratia took over as CEO from Sachin Dev Duggal, she revealed most of the workforce had already been laid off, which only made the earlier claims feel shakier.

The collapse of Builder.ai serves as a cautionary tale in the startup ecosystem, where the excitement surrounding artificial intelligence can often eclipse the reality of what these companies actually deliver. The allure of AI has undeniably captivated investors, leading many to overlook the foundational elements that truly drive innovation. This phenomenon has contributed to an inflated valuation landscape, where promises of advanced technology can overshadow the lack of substantive results.

To navigate these treacherous waters, it is essential for entrepreneurs to engage in thorough due diligence and prioritize genuine innovation over mere hype. Transparency in operations not only fosters credibility but also helps in building trust with investors and consumers alike. The Builder.ai incident illustrates the critical need for startups to ground their offerings in reality rather than relying solely on the glamour of AI to attract funding.

Builder.ai’s downfall highlights the risks of blindly buying into AI hype. Beneath the glossy marketing and billion-dollar valuation was a business model propped up by hundreds of human developers, not cutting-edge automation.

The collapse shows why both investors and customers should dig deeper before trusting bold tech promises. Transparency, not buzzwords, is what separates real innovation from smoke and mirrors, especially in an industry evolving as rapidly as AI.

The collapse of Builder.ai highlights a significant lesson for investors and entrepreneurs in the AI sector.

For Builder.ai, the “AI” was supposed to scale, but it turns out the real engine was layoffs, fake numbers, and a lender that pulled the plug.

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