Microsoft-Backed Builder.ai Faces Bankruptcy After Cash Seizure
Builder.ai, a British artificial intelligence startup backed by Microsoft Corp. and the Qatar Investment Authority, is set to file for bankruptcy after its CEO revealed that a major creditor had seized most of the company’s cash.
According to Builder.ai CEO Manpreet Ratia, Viola Credit, which provided $50 million in debt to the software firm last year, seized $37 million from Builder.ai’s accounts, leaving the company with only $5 million. The reason behind the seizure remains unclear as Viola Credit didn’t immediately respond to requests for comment.
The company, operating in five jurisdictions including the UK, US, India, UAE, and Singapore, will undergo bankruptcy proceedings according to each region’s process. Ratia announced that he had made the difficult decision to lay off most of Builder.ai’s employees due to the severe cash shortage.
The remaining $5 million is currently held in Indian accounts and cannot be used to pay workers due to restrictions on transferring money out of the country. This development marks a significant downfall for a company that raised $250 million in funding just two years ago, led by QIA, one of the world’s largest sovereign wealth funds. Microsoft also made an equity investment in 2023 as part of a strategic partnership.
Builder.ai’s recent troubles began when it was forced to lower sales estimates provided to investors and hired auditors to examine two years of accounts. This came after concerns were raised by former employees that the company may have inflated sales figures. The company’s missteps highlight the risks associated with backing promising AI startups, as investors seek to replicate the success of industry heavyweights like OpenAI and Anthropic.
After the debut of ChatGPT, London-based Builder.ai capitalized on investor enthusiasm for AI to attract prominent investors. The firm’s founder, Sachin Dev Duggal, stepped down as CEO in February and was replaced by Ratia. At the time, Builder.ai also reduced its board size from nine to five seats and asked Duggal to relinquish four of the five seats he controlled.
“The business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position,” Builder.ai stated on Tuesday. The company plans to appoint an administrator to manage its affairs.
Other investors in Builder.ai include the World Bank Group’s International Finance Corp., Hollywood mogul Jeffrey Katzenberg’s WndrCo, Lakestar, and SoftBank Group Corp.’s DeepCore incubator. The insolvency proceedings in the UK and other countries with similar laws differ from bankruptcies in the US, typically involving a court-approved administrator working directly with creditors.
Established in 2016, Builder.ai offers a platform for businesses to create custom smartphone apps with minimal coding required, allowing for faster turnaround times compared to traditional software outsourcing.
