The collapse of Builder.ai into insolvency shows that the current trend of using AI for everything isn’t a guaranteed path to success. It certainly won’t overcome leadership failures or a product that simply didn’t satisfy customers. The sudden collapse, which left over 1,000 employees jobless almost overnight, shocked the tech sector and exposed deeper issues within the company.
Founded in 2016, Builder.ai had no shortage of publicity, including in TFN, when it entered into a partnership with Microsoft in 2023. The platform offered a low- or no-code software development platform, and the promise that anyone could be a software developer. The link with Microsoft promised integration of Builder.ai with Teams: software development could be nothing more than a Teams call. Microsoft’s investment, along with others, totalled $450 million and saw Builder.ai become a unicorn. Other investors included the Qatar Investment Authority, Jungle Ventures, and Iconiq Capital, showing the global confidence in the company’s vision.
Not quite the no-code solution promised
Even from the start, the platform did not match the hype surrounding AI. In fact, they offered AI-supported software development. Their website, still live despite the insolvency, explains that the process involves chatting with their LLM ‘Natasha’, which puts together a proposal, before a human developer works with AI coding and components to develop the app.
The steps seem simple, they even suggest that the ‘AI assembles your app features like a LEGO set’. The analogy, however, may be a poor one. A LEGO fan would be quick to point out that the sets go through a rigorous, and entirely human-led, design process. And a software developer would point out that connecting software components frequently doesn’t come with the satisfying click of LEGO, but instead can reveal incompatibilities, unintended consequences, and errors, many of which can be difficult to anticipate or resolve.
Even with managed expectations, the platform seemed to struggle. Many users reported that the platform’s “no-code” promise was misleading, as significant technical expertise was still required to resolve integration issues and customise applications beyond basic templates.
Behind Builder.ai: A good idea with poor leadership
One issue seems to have been Builder.ai’s leadership. The founder, Sachin Dev Duggal, was, like his company, not short of publicity, with profiles highlighting his status as a serial entrepreneur even when he was a teenager.
However, some questions have been raised about his suitability. In 2024, he was named a suspect in a money laundering investigation in India. A year later, it transpired that Builder.ai’s own accounts had some question marks.
Earlier this year, they lowered their revenue estimates for the second half of 2024 by 25% after whistleblowers said that the company had been inflating its sales figures. In a bid to restore confidence, they appointed auditors from the Big Four companies to review their accounts. Founder Duggal was also replaced as CEO, although he retained a place on the board and his title of ‘Chief Wizard’. The moves fuelled speculation, although Builder.ai insisted the moves were simply related to the company’s growth.
However, perhaps sensing more, the previous auditor — who should be independent — was actually an associate of Duggal’s. While there appears to be no current connection between the two, the auditor had previously served as a director at a company Duggal had founded. This raises questions about their impartiality and the accuracy of the accounts they audited. Further, the company had rapidly switched between several small audit firms for its overseas subsidiaries, a red flag for many investors.
Failure to deliver on its promise
Perhaps more fundamentally, Builder.ai’s collapse may be because its product just wasn’t very good. Although it rode the wave of AI hype, it frequently failed to deliver on its promises.
Consumer research suggests that between 50% and 95% of purchase decisions are only made after reading product reviews. And just a glance at Trustpilot, of all places, may hint at reasons behind falling revenues.
The Builder.ai website highlights some four-and-a-half- and five-star reviews from TrustPilot. However, the actual site reveals that around a quarter of reviews are just one star and that the proportion of poor reviews increased dramatically around two years ago.
The complaints, covering everything from billing problems to late or non-delivery and non-working products, suggest, at best, a hit-and-miss service level. Some customers also reported that after significant upfront payments, their projects were delayed for months or never delivered, leading to several legal disputes and refund demands.
There were also complaints from inside the company. The employee review site, Glassdoor, illustrates a strong negative opinion among employees, and many do not hold back. Recent reviews include titles like ‘AI-powered chaos. A masterclass in corporate gaslighting and ‘A Netflix Documentary in the Making: Misaligned Leadership and a Demoralised Workforce’. One review, from an employee already looking to work elsewhere, noted “the company’s poor reputation is well-known in the industry; in fact, I was openly laughed at during recent interviews simply for having worked there.”
The only frequently cited positive was that salaries were paid on time, although the insolvency will, presumably, remove even that small perk of a Builder.ai career. The abrupt collapse left hundreds of employees in multiple countries without severance or clear communication, further damaging the company’s reputation.
The lessons the sector can learn from Builder.ai
Much of the negative coverage — and the poor customer and insider reviews — date from after the major investments in Builder.ai. But not all, and there should arguably have been enough negative press to raise questions.
Investors must be asking themselves questions about their due diligence, especially since the process would have given them far greater access to company data and personnel than publicly available data. At the very least, they might want to add ‘Search site:trustpilot.co.uk + company name’ to their pre-investment checklist.
For others, it will serve as a warning that slapping the ‘AI’ label on a product means nothing on its own. Whatever the tech trend, success needs a solid business model, good leadership, and satisfied customers.
