1. What Happened in a Nutshell: A Billion-Dollar Company That Wasn't Real
Builder.ai was a company that promised to make building software apps as easy as ordering a pizza, using amazing artificial intelligence (AI). It looked like a huge success, worth over $1.5 billion. But in May 2025, it all came crashing down, and the company went bankrupt.
It turned out Builder.ai wasn't what it seemed. The big secret? They claimed super-smart AI was building the apps, but really, they were using a lot of human engineers in India to write the computer code by hand. They also allegedly lied about how much money they were making – sometimes saying it was three or four times more than the real amount – to get big companies to invest.
Big names like Microsoft and the Qatar Investment Authority (a giant fund from Qatar) poured over $450 million into Builder.ai. They seemed to believe the founder, Sachin Dev Duggal, who called himself the "Chief Wizard," and his exciting promises. But news reports and inside information started to show the truth. Builder.ai is now seen as a prime example of "AI washing" – companies pretending to use AI just to look good and get money.
This mess didn't just lose money; it also really hurt people. The way Builder.ai allegedly used Indian workers to keep up the "fake AI" story made many in India feel sad and ashamed, damaging the country's tech reputation. The fact that this went on for eight years shows that either investors weren't checking things carefully enough, or they were so excited about AI that they ignored warning signs.
2. The Amazing Promise: "Software as Easy as Ordering Pizza"
Builder.ai started in 2016 (first called Engineer.ai) by Sachin Dev Duggal. His big idea was to make creating software apps simple and cheap, even for people who weren't tech experts. His catchy slogan was that building an app would be "as easy as ordering pizza." This sounded great to small businesses and new companies.
They said their main tool, "Builder Studio," was powered by AI. A key part was an AI helper called "Natasha," who was supposed to be the "world's first AI product manager," guiding users. This made it look like everything was automated and super advanced. They claimed their AI could put together pre-made software pieces like digital Lego blocks, with humans only doing a little bit of work. They promised this "AI assembly line" would make apps super fast and cheap.
Builder.ai quickly said they were doing great, with big clients like the BBC. They even said their income shot up 230% in one month during 2020. This got investors very interested. But looking back, it seems this impressive image was mostly marketing, hiding the real way they worked.
3. The Big Lie: "No AI, Just Engineers" – People Behind the Curtain
The biggest problem was that Builder.ai's claims about using advanced AI were allegedly a lie. Instead of smart AI programs, they were accused of using many engineers in India to do the coding by hand, while telling everyone it was automated.
The Wall Street Journal first reported this in 2019. They said Builder.ai (then Engineer.ai) was "all engineer, no AI." People who worked there said the company didn't really have the advanced AI they talked about. The AI helper "Natasha" was mostly a front for human project managers. Even the company leaders didn't seem to know much about advanced AI. Later, many former employees confirmed this online, saying the company was "all humans, no intelligence" from the start, and that bosses knew about the lies. Some also said they were paid badly and worked in poor conditions.
Sachin Dev Duggal tried to defend the company, saying they used a mix of "Humans and AI" and never lied to customers. But this didn't match their strong AI-focused marketing. It seemed like they made up this explanation after they were caught. That this lie went on for about eight years, even after the first news report, suggests it was a core part of their business plan.
What made it especially bad was the claim that "Indian developers were pretending to write code as AI." This could make people think Indian tech workers are just used for cheap manual labor to support fake claims by Western companies, instead of being innovators themselves. This is why many in the Indian tech world felt "sadness and humiliation."
4. The Fake Money Story: Raising Over $450 Million with Made-Up Numbers
Builder.ai's image as an AI leader helped it get a lot of money – over $450 million. This made it a "unicorn" (a startup worth over $1 billion). Big investors included Microsoft, the Qatar Investment Authority (QIA), SoftBank (a major Japanese company), and others. These famous investors made Builder.ai look very real and successful.
But a key part of this was allegedly faking their income. Reports say Builder.ai showed investors money statements that were three to four times higher than what they actually earned. For example, in early 2025, they had to admit that their 2024 expected income was really $55 million, not the $220 million they first claimed. And their 2023 income was only $45 million, not $180 million. Some insiders said money numbers had been puffed up by 20% to 300% over time.
Table 1: Builder.ai's Main Funding Rounds & Big Investors
| Funding Round | Date | Money Raised | Main Investors | Other Big Names |
|---|---|---|---|---|
| Series A | Nov 2018 | $29.5 million | Lakestar, Jungle Ventures | SoftBank |
| Series D | May 2023 | $250 million | Qatar Investment Authority (QIA) | Microsoft, Insight Partners, Jungle Ventures |
| Debt (Loan) | Oct 2024 | $50 million | Viola Credit | |
| Emergency Money | Mar 2025 | $75 million | Existing Investors | |
| Total (Roughly) | ~$565M | (Often reported as $450M-$500M before some loans/emergency cash) |
Table 2: Builder.ai's Claimed vs. Real Income
| Year | Claimed/Expected Income | Real Income | How Much It Was Inflated |
|---|---|---|---|
| 2023 | $180 million | $45 million | 300% (4 times) |
| 2024 (Expected) | $220 million | $55 million | 300% (4 times) |
That Builder.ai kept getting money even after the 2019 Wall Street Journal report shows investors weren't checking carefully. One expert said it was "FOMO (Fear Of Missing Out) investing" – people invested because they were scared to miss out on the next big AI thing, even if it meant not looking too closely. Microsoft investing probably made other investors feel it was a safe bet.
Problems with how their accounts were checked (audited) also helped. There were reports of auditors who had previous connections to Duggal, not enough proper checks of the whole company's money, and they didn't have a Chief Financial Officer (CFO) – the main money boss – from mid-2023. These mistakes allowed the money lies to grow.
5. The Crash: From "Chief Wizard" to Broke
In early 2025, Builder.ai's fake world started to fall apart in public.
- Bosses Leave: In February/March 2025, Sachin Dev Duggal stepped down as CEO but stayed on the board, still calling himself "Chief Wizard." A new CEO, Manpreet Ratia, was brought in to try and fix things.
- Desperate for Cash: The company had to admit its income numbers were way off. They got an emergency $75 million from current investors in March 2025 and fired 220-270 employees (most of their workers).
- The Final Straw: In May 2025, Viola Credit, a company that had loaned Builder.ai $50 million, took about $37 million from Builder.ai's bank accounts. They did this because Builder.ai had broken their loan agreement by lying about its financial health. This left Builder.ai with only about $5 million they could access, which wasn't enough to pay bills or staff.
- Bankruptcy: With no money, Builder.ai declared bankruptcy. Its website shut down. It turned out they owed huge amounts to other companies, like $85 million to Amazon Web Services (AWS) and $30 million to Microsoft.
Table 3: How Builder.ai Collapsed (Early 2025 – May 2025)
| Date (Roughly) | What Happened |
|---|---|
| Early 2025 | Had to admit its income numbers were much lower than claimed. |
| Feb/Mar 2025 | Sachin Dev Duggal quit as CEO but stayed "Chief Wizard." New CEO hired. |
| March 2025 | Got $75M emergency cash from investors. |
| Mar/Apr 2025 | Fired 220-270 employees. |
| May 2025 | Lenders took ~$37M from company bank accounts. |
| May 2025 | Builder.ai announced it was going bankrupt in many countries. |
| May 2025 | Company website mostly shut down. |
The company blamed "past problems and decisions." The new CEO mainly blamed the lenders for taking the cash, saying it ruined their turnaround plan. But it’s hard to ignore the long history of lies about their tech and money.
6. The Damage: A Black Eye for India's Tech Dreams and "Sadness and Humiliation"
Builder.ai's collapse, led by Duggal, has hurt more than just the company. It's cast a dark shadow over India's growing tech scene. The idea that they "faked AI" using Indian programmers has made many in India feel "sadness and humiliation," as it damages the country's hopes of being seen as a world leader in tech.
News reports warned that because Builder.ai was "founded by Indian entrepreneurs," its failure could make investors more suspicious of other Indian AI startups. The story that "Indian programmers were impersonating AI" is especially harmful. It could make people think Indian IT is just about cheap labor for fake Western tech, not real innovation. This is a big setback for India's tech reputation.
Online, many Indian tech workers expressed anger and disappointment. They called Duggal names (some even mentioned a "fraudulent family past") and described Builder.ai as a "slave labor sweatshop" that underpaid its workers. Some ex-employees called it "the Theranos of AI" (Theranos was another company that famously lied about its technology). These feelings show not just the money lost, but also the emotional hurt to people who feel their skills and community have been shamed. The alleged mistreatment of Indian developers is a big part of this.
Customers, many of whom were small businesses, were also left in a mess, unable to use their apps and possibly losing data. The scandal could make investors warier of all Indian tech companies, not just AI ones.
7. "AI Washing": A Wider Problem of Tech Hype
The Builder.ai scandal is a big example of a wider problem called "AI washing." This is when companies trick people by saying their products or services use AI, even when the AI part is tiny, overblown, or totally fake. They do it to get attention, money, and customers because AI is so hyped up.
Many startups feel pressured to say they use "AI." The number of new companies claiming to use AI jumped from 10% in 2022 to 25% in 2023, and was expected to be over 33% in 2024. Other examples of AI washing include Amazon's "Just Walk Out" store technology, which reportedly used over a thousand human reviewers in India to check purchases, and Coca-Cola claiming a new drink was "co-created with AI" without much proof.
A big reason for AI washing is "FOMO" (Fear Of Missing Out) among investors. They get so excited about the "next big thing" that they might invest quickly without checking things properly. This leads to companies being valued way too high and then crashing when the AI promises don't come true.
It's hard for investors and customers to know if AI claims are real because AI technology is complicated and often secret. This shows why it's so important for investors to do very careful checks. Governments are starting to notice this problem. In the U.S., the FTC and SEC are beginning to punish companies that make false AI claims.
But Builder.ai seems to have gone beyond typical AI washing. They are accused of faking their main technology – AI-powered app building – for almost eight years. This is more like a long-term fraud than just misleading marketing. The problem is that in the world of startup investing, a good story about exciting new tech can sometimes hide the need to check if it’s actually real.
8. The Aftermath: Lessons from Builder.ai's Wreckage
Builder.ai's massive failure is a big warning for the whole tech and investment world. It’s a story of:
- Lying about technology: Claiming AI did the work when it was humans.
- Lying about money: Faking income numbers to fool investors.
- Bad leadership and company controls: The founder's controversial actions and poor financial oversight.
The damage is huge. Big-name investors lost money and look bad for not checking more carefully. Employees lost jobs and their careers might suffer. Customers, including many small businesses, had their operations disrupted.
Perhaps the saddest outcome is the damage to India's tech reputation. The story of Indian programmers being used to "pretend to be AI" is deeply embarrassing and could hurt India's image as a place of real tech innovation.
This whole mess shows a strong need for:
- Startups to be more honest.
- Clear rules about ethical behavior.
- Investors to be much more careful and skeptical, especially with exciting but hard-to-understand tech like AI.
The comparison of Builder.ai to Theranos is fair. It’s a chilling reminder of what happens when hype beats honesty. As someone said, "Builder.ai's story is less about a technology that failed and more about the consequences of pretending it ever worked."
There are deeper lessons too. That Builder.ai kept getting huge amounts of money, even after early warnings, shows a weakness in how startups are funded – sometimes fear of missing out is stronger than good judgment. When big names like Microsoft invest, it can give a false sense of security to others. And the terrible failures in checking the company's money and management show these aren't small mistakes, but big problems that allow major fraud to happen.
Going forward, investors might become more careful, looking for companies with proven tech and honest management. This could be good, but it might also make it harder for truly new and experimental ideas to get funding.
The scandal also shows investors need to check out founders' characters, not just their ideas. Are they trustworthy? Do they have a history of bad behavior?
For India's tech community, this painful event might push them to be even more committed to honest innovation and strong self-policing. The ashes of Builder.ai teach a hard lesson: real success can't be built on lies. The talented Indian developers whose work was misused deserve to be known for their real skills, not as part of a giant trick.
