Microsoft-backed Builder.ai Files for Bankruptcy After ‘AI’ Exposed as 700-Person Team

Remember Builder.ai? Yes, the Microsoft-backed AI startup—it just collapsed under the weight of its own hype.

It was supposed to be the startup that made building an app as easy as ordering takeout. But Builder.ai, once valued at $1.5 billion and proudly backed by Microsoft, is now bankrupt. It was revealed that the company’s so-called “AI” was actually hundreds of humans pretending to be bots.

According to a report by the Times of India, nearly 700 engineers in India were manually handling requests that Builder.ai’s platform had marketed as the work of its AI assistant, “Natasha.” The company had claimed to use artificial intelligence to write code on demand. But behind the scenes, it was old-fashioned human labor.

The real collapse began last month when Viola Credit seized $37 million from Builder.ai’s accounts. That led to an audit, where it was discovered the company had inflated its 2024 revenue forecasts by 300%. Instead of the $220 million it promised investors, Builder.ai had only pulled in $50 million.

Microsoft and the Qatar Investment Authority were among those who poured in a total of $445 million. Founder Sachin Dev Duggal quietly stepped down earlier this year, and his replacement, Manpreet Ratia, is the one who reportedly uncovered just how deep the misrepresentation went.

For now, a federal investigation in the U.S. is underway. Prosecutors in New York are already seeking financial records.