TMTPOST — Just a year after raising $250 million in a blockbuster Series D funding round and reaching the brink of unicorn status, UK-based AI startup Builder.ai has officially filed for bankruptcy, the company announced on May 20.

The filing comes only weeks after a sweeping internal restructuring slashed the company's workforce from 770 to just 220 employees, signaling deeper troubles within the once high-flying low-code/no-code platform provider.

Founded in 2016 as Engineer.ai, Builder.ai set out with an ambitious goal: make app development as easy as ordering takeout. Its AI-driven platform promised to let non-coders build mobile apps and websites by simply describing their needs in natural language.

Backed by big names like the Qatar Investment Authority, SoftBank's DeepCore, and Singapore's Jungle Ventures, Builder.ai reached a $1 billion valuation in 2023. That same year, it forged a strategic partnership with Microsoft, integrating its human-assisted AI system "Natasha" into Microsoft Teams and Azure OpenAI services.

But behind the scenes, the cracks were already beginning to show.

Allegations that Builder.ai had grossly exaggerated its AI capabilities date back to 2019. A Wall Street Journal investigation reported that the company—then known as Engineer.ai—relied heavily on human engineers in India, rather than true AI, to build its applications. The story, citing whistleblowers, claimed the company misled clients and investors about the extent of automation in its development process.

Builder.ai's founder, Sachin Dev Duggal, denied the allegations, calling the report "orchestrated" by a disgruntled former employee. However, similar exposés from The Ken and The Financial Times soon followed, raising concerns about the company's financial integrity and Duggal's legal entanglements in India.

By March 2024, internal audits revealed Builder.ai had overstated revenue by 20%–25%. Duggal resigned as CEO and was replaced by Ratia, a former Amazon and Flipkart executive who also serves as a managing partner at Jungle Ventures.

Financial disclosures paint a grim picture. In October 2024, the company reported $50 million in debt. By March 2025, even after receiving a $75 million capital injection, it was burning through over $500,000 a day, with annual revenues covering less than 9% of expenses.

Builder.ai currently owes Microsoft $30 million and Amazon $85 million in unpaid debts, making the tech giants some of the biggest financial casualties of the collapse.

Builder.ai's fall underscores growing skepticism around AI startups whose promises may outpace their technical reality. As investor enthusiasm for AI continues to fuel record-high valuations, the company's implosion serves as a cautionary tale for founders, investors, and customers alike.

"This isn't just about one failed startup," said one industry analyst. "It's about the inflated expectations around AI and how quickly hype can turn into hard lessons."

Builder.ai joins a growing list of AI ventures grappling with the pressures of commercialization and transparency in a white-hot market. As the pace of innovation accelerates, investors and customers are being reminded that even the most promising AI tools still require human judgment—and a viable business model—to succeed.