Builder.ai, a Microsoft-backed AI startup, was once valued at $1.2 billion. Bankruptcy File: Will AI be in a different .com bubble?

Builder.ai fall fall: First AI domino

Builder.ai, a $1.2 billion AI startup that promised to be able to create apps without writing a single line of code using its assistant “Natasha,” has filed for bankruptcy.

Just a few months ago it looked unstoppable. At one point, Builder.ai was riding high in the London startup scene. It wasn’t just another AI company – it was that company.

The company raised $445 million, shut down a $250 million Series D, employing more than 1,500 people, carrying the hype that most startups dream of. Supported by Microsoft and Qatar’s sovereign wealth fund, Builder.ai has established itself as the future of software development. No coding is required.

It’s gone now.

“The UK company entered bankruptcy proceedings this week after major creditors seized $37 million from their accounts and left $5 million in the company’s financial resources as they raised $445 million,” Bloomberg reported.

Founder Sachin Dev Duggal knew how to sell his dreams. He had a presence, a story that Poland and people wanted to believe in: a codeless future where software built itself. Investors jumped in. The pitch is simple and sharp: Builder.Ai will deprecate developers.

Then it all fell apart.

The sudden collapse of the builder

By May 2025, Builder.ai was bankrupt. The rating has disappeared. The same was true for my dreams. It was the first billion-dollar AI startup to fall apart completely, leaving annoyed customers, laid back employees, and much bigger questions: is this the beginning of the end of AI hype?

The mirage is unleashed

The company’s stories were not just broken apart, they were exposed.

At the investors’ pitch, Builder.ai charged $220 million in 2024 revenue. Real number? Just $55 million. It’s not a rounding error. That’s 300% exaggeration. And somehow Microsoft didn’t flinch. Qatar did not do that either. Builder.ai talked about a good game as everyone wanted the next big thing with AI.

But the technology wasn’t just about appearance. The Wall Street Journal 2019 report was already shattered. I didn’t do much of the company’s so-called “AI.” Behind the curtains were hundreds of Indian and Ukrainian engineers, manually coding what was advertised as automated magic. The customers certainly got real apps, but the pitch of automation was pretty much fiction. It was outsourcing, dressed up wearing an AI chatbot on the front.

WSJ is not alone. A former Builder.ai employee told Bloomberg News that the company exaggerated sales to investors and forced a quiet revision of its revenue forecast in March. However, sales were not the only thing exaggerated. When researching the company in 2019, insiders revealed that the construction of so-called AI-driven apps is driven primarily by software developers in Ukraine and India rather than automation.

Then came the spending.

To keep floating, Builder.ai borrowed $50 million from Viola Credit. However, the burn rate was large. The company had 770 employees, a flashy office, and no brakes. Accumulated debt – $85 million for Amazon and $30 million for Microsoft. They didn’t wait when Viola suspected that the terms of the loan had been violated. They pulled $37 million from their Builder.ai account, leaving just $5 million.

That was the last nail.

The final crash

Sachin Dev Duggal left the stage in February 2025. He handed over the reins to Manpreet Ratio, an experienced operator known for cleaning up troublesome situations. The ratio moved fast – slashing 270 jobs, cutting costs and stabilizing the ship. For a moment it looked like a builder.

Viola then drained cash.

In May, Builder.ai filed for bankruptcy. The platform has been frozen. The clients (startups, small businesses, founders chasing their tech dreams) had half the apps left and no support. One of the fierce founders put it together in an X post.

The backlash exploded online. People have dug up Builder.ai’s marketing claims. Duggal’s sudden pivot to “consulting” raised an eyebrow. One photo showing the scribbles scribbled in Shoreditch’s office with shutters has gone viral.
“Aye lied. We’re dead.”

Meanwhile, Builder.ai has since deleted its website. Visitors were greeted with a message of naked bones:

For customer inquiries, please contact customers@builder.ai.
For inquiries about capacity partners, please contact capsulenetwork@builder.ai.

This wasn’t just a failed startup. It felt like the first big crack in the AI ​​Gold Rush.

Will AI be a different .com bubble?

Builder.ai’s bankruptcy is not just a corporate corpse, as a Microsoft-backed $1.2 billion beloved, but a flare-up in AI Sky. The similarities with the 2000 .com bubble are frightening. It’s a cult of Sky High ratings, unstable business models and hype that surrounds reality. But is AI destined to crash like pets.com, or is it built on sturdy ground? Let’s break it down.

.com bust echo

Hype-driven evaluation
Builder.ai was valued at $1 billion while earning just $55 million. It’s straight from the dot com playbook. And this is not an isolated case. According to CrunchBase, the AI ​​startup raised $60 billion in 2024 alone. Many had no actual revenue and unproven products. It’s the webvandéjàvu.

AI cleaning
Slapping “AI” on a business plan is the new “.com”. Just like in the early 2000s, when all companies added web addresses to promote valuation, today’s startups are riding hard on AI labels, even without the real technology behind it. Builder.ai promised automation, but behind the curtain there was a human writing code.

“Ai ‘Washers” cannot exaggerate how it comes out. The uplifting startup collapse could mark a broader decline in practice of secretly using humans behind the curtains,” Bloomberg wrote.

Gold Rush Mentality
VCs are throwing money at what looks like AI. According to CB Insights, in 2023, AI scooped up 20% of global VC funding. The urgency to invest and ask questions first reflects the precise thinking that later flooded companies like Kozmo.com with the dot-com era.

Excessive
There are thousands of AI startups that sell similar tools, such as chatbots, app builders, image generators and more. It’s a sea of ​​appearance, and most are fighting for the same dollars. In 2000, it was e-commerce. Now it’s ai. The results could be the same: mass extinction events of imitators.

Why AI doesn’t pop

Actual results
This time, the core tech is not imagined. Tools like Github Copilot are already increasing developer productivity. In healthcare, AI startups like Insilico Medicine are raising large funds by developing $400 million in new drugs in 2024 alone. McKinsey estimates that AI can add $13 trillion to the global economy by 2030. This is a far cry from the sock dolls that sell dog food.

Big Tech’s full buy-in
Back in the days of dotcom, the startups were running solo. This time, giants like Microsoft, Amazon and Google are fully built in. They build AI directly on cloud products, enterprise tools and platforms, and have the financial muscles to keep it up.

More grounded market
The AI ​​industry is already seeing integration. According to Pitchbook, AI-related M&A transactions reached $30 billion in 2024. Stronger players are gaining weaker players. Unlike in 2000, there were very few companies where the business model worked, so top AI players like Openai and Xai today are already making real money.

Tighter overlook
The regulations are finally catching up. The EU AI law and pending US rules are putting pressure on startups to prove their claims. That extra scrutiny can help rule out the builder.

Final Thoughts

It’s not the end of AI that Builder.ai gets mad. But it’s a wake-up call.

The hype is going hot. The founder makes a big claim. Some, like Duggal, walk away just before everything explodes. It’s no wonder X’s posts refer to AI as “crypto 2.0” or “steroids.com.”

Still, AI is not built entirely on the heat. This technology is offered in many areas, with major players having enough traction to get through the shakeout. But that doesn’t mean you can’t see more businesses fall apart.

Interest rates are rising, according to CrunchBase. VC funding fell 15% in the first quarter of 2025. That alone will wipe out the startup with a balance sheet and empty promise.

Companies with real products, real revenue and real technology survive. rest? They’ll be like Builder.ai. However, another story of attention reminded me of what it promised and how violent it fell.

Founder of Builder.ai