Collapse of Builder.ai: A Cautionary Tale in AI Hype
Builder.ai, a London-based startup that raised $445 million by promising to revolutionize app development with artificial intelligence, has collapsed. The company’s downfall came after it was exposed that the ‘AI’ behind its operations was not machine intelligence at all, but 700 human engineers based in India.
Builder.ai marketed itself as a no-code platform powered by an AI assistant named ‘Natasha,’ which supposedly could build software as easily as assembling Lego bricks. However, Ebern Finance founder Bernhard Engelbrecht revealed in a widely shared post on X that Natasha was not an algorithm but a large manual operation disguised as AI. Customer requests were sent to the Indian office, where the engineers wrote code manually, resulting in apps that were often buggy, dysfunctional, and had unreadable code.
The unraveling began when Viola Credit, a creditor that lent Builder.ai $50 million in 2023, seized $37 million from its accounts after the company defaulted on its loan. This move left Builder.ai unable to pay its employees or continue operations. Additional funds held in India remain locked due to regulatory constraints, according to Bloomberg.
Builder.ai has now entered formal insolvency proceedings, with a court-approved administrator appointed in the U.K. to explore asset recovery and business salvage options. The company stated on LinkedIn that it is ‘working closely with administrators’ and thanked its staff and stakeholders while acknowledging that earlier missteps had pushed it ‘beyond recovery.’
This episode has become a symbol of the growing fragility in the AI startup space, where hype often outpaces actual technology. Phil Brunkard of Info-Tech Research Group noted that many AI firms rushed to scale based on hype, often lacking strong financial controls or truly differentiated offerings. The collapse of Builder.ai raises questions about due diligence, transparency, and how easily investor dollars can be misled by the illusion of automation.
The case of Builder.ai serves as a warning in the tech industry about the dangers of exaggerating technological capabilities and the importance of genuine innovation and transparency in business practices.
