In the bustling world of tech startups, few stories have captured the imagination—and the skepticism—like that of Builder.ai, a London-based company that promised to revolutionize app development through artificial intelligence. Founded in 2016 by Sachin Dev Duggal, the firm marketed itself as an AI-powered platform capable of building custom apps without the need for coding expertise, drawing in high-profile backers including Microsoft and the Qatar Investment Authority. But beneath the glossy pitches and soaring valuations lay a stark reality: much of the “AI” was powered by human engineers, and the company’s aggressive growth masked deep operational flaws. As Rest of World detailed in a recent investigative feature, former employees revealed that Builder.ai’s platform, dubbed Natasha, relied heavily on manual labor from teams in India, contradicting claims of automated magic.

The company’s rise was meteoric. By 2023, Builder.ai had secured over $445 million in funding, achieving a valuation north of $1.5 billion. Duggal, a charismatic entrepreneur with a background in engineering, positioned Builder.ai as a democratizer of software creation, allowing small businesses to build apps via simple conversational interfaces. Investors were hooked; Microsoft even integrated Builder.ai into its ecosystem, touting it as a no-code solution for enterprises. Yet, whispers of trouble emerged early. Customers complained of delayed deliveries, buggy products, and apps that didn’t match specifications, issues that TechSpot later highlighted in its coverage of the collapse.

The Illusion of Automation

Interviews with ex-employees paint a picture of a firm stretched thin by its own hype. One former product manager told Rest of World that Natasha, the AI assistant, was essentially a facade—prompts from users were routed to human developers who manually assembled code blocks. This “Wizard of Oz” approach, as some insiders called it, involved hundreds of engineers in low-cost locations like India, working around the clock to simulate AI efficiency. The deception wasn’t just internal; marketing materials exaggerated the platform’s autonomy, leading to what analysts now term “AI washing.” Posts on X (formerly Twitter) amplified the scandal, with users mocking the revelation that Builder.ai’s “AI” was actually 700 Indian engineers pretending to generate responses, as echoed in viral threads from early June 2025.

Financial red flags compounded the tech troubles. Builder.ai burned through cash at an alarming rate, spending lavishly on marketing and executive perks while revenue figures were allegedly inflated through questionable practices like round-tripping—funneling money back into the company to boost apparent sales. The Register reported in May 2025 that the company had coded itself into a corner, with bad decisions leading to insolvency. By then, a major creditor, Viola Credit, had seized $37 million from accounts, leaving the firm with scant resources to operate across its five countries.

Backers and Betrayals

High-profile investors felt the sting. Microsoft’s backing, announced with fanfare, now serves as a cautionary tale in overhyping AI startups. The Qatar Investment Authority, which led a $250 million round, watched its stake evaporate as Builder.ai filed for bankruptcy protection in late May 2025, as confirmed by TechCrunch. Former staffers described a toxic culture under Duggal, who allegedly prioritized appearances over substance, hosting extravagant events while ignoring pleas for better engineering resources. One engineer recounted to Rest of World how promised AI upgrades never materialized, leaving teams to patch together apps manually amid mounting deadlines.

The fallout extended beyond finances. Lawsuits and winding-up petitions piled up, including one from a PR firm over unpaid debts, as noted in Sifted two weeks ago. Customers, many small businesses that bet on Builder.ai’s promises, were left with incomplete projects and no recourse. Recent X posts from July 2025, including those from tech journalists, highlight ongoing scrutiny, with some labeling the saga a “billion-dollar illusion” fueled by AI hype.

Lessons for the AI Era

Builder.ai’s demise underscores broader challenges in the AI sector, where hype often outpaces capability. Analysts point to it as a harbinger for other startups peddling unproven tech, urging investors to demand transparency in AI claims. As Yahoo Finance outlined in its May 27, 2025, report, the company’s $450 million burn rate exposed the perils of scaling without solid foundations. Duggal has remained largely silent, but sources close to the matter suggest he’s exploring new ventures, undeterred by the wreckage.

For industry insiders, this isn’t just a startup failure—it’s a referendum on ethical AI marketing. Former employees, many now scattered across the tech world, hope the exposure prompts real innovation rather than smoke and mirrors. As one put it in a Rest of World interview, “We were building dreams on borrowed time.” With Builder.ai’s assets likely headed to auction, the question lingers: How many more “AI” unicorns are one revelation away from collapse?