Builder.ai: Is This The Beginning Of The AI Bubble Burst?

An AI Scam or Genius Use Of The Abbreviation AI = An Indian?

Imagine paying to use an AI software, only to discover that the proposed AI is actually a human being working behind the scenes. In this case, an Indian engineer.

AI scams are getting a new definition. Normally, when you hear of AI scams, you immediately envision someone impersonating another person in a bid to extort or generally get something that the victim would ordinarily not part with. 

However, today’s AI scam expose is on a UK startup that was once a unicorn funded by big tech companies like Microsoft and even a Qatar sovereign wealth fund. It secured several rounds of funding and was even valued at $1.5 billion before announcing that it would file for bankruptcy this May.

Have You Heard Of Builder AI?

I didn’t before the news of their collapse started making the rounds. So, a quick intro!

Builder.ai was one of the frontier AI startups promoting no-code tools for building software. Part of their marketing included slogans like, “allowing everyone to build software as easy as ordering pizza”. Not very far in meaning from the current slogan of “democratizing software building,” the new no-code tools we have now are being marketed with.

Some Facts About Builder AI

•  It was created in 2016. This means they have been in operation for nine years. 
• Was previously named Engineer AI.
• Is/was based in London.
• It raised more than $450 million from investors like Microsoft and Qatar Investment Authority, a sovereign wealth fund. Microsoft even had plans to integrate them into their cloud and Microsoft Teams app.
• In February this year, when the heat was on, their founder and CEO, Sachin Dev Duggal, stepped down from the board but retained the title of “Chief Wizard”.

Bloomberg describes it as the most high-profile AI startup to collapse since ChatGPT was launched.

The AI Washing Part

While researching this news I came to know of something called AI washing.

So, AI washing is a deliberate misrepresentation of AI capabilities  for competitive advantage. That is, making something sound more advanced and AI-driven than it is. Much like greenwashing, where companies that don’t know the first thing about being organic or climate-friendly use those terms freely in their marketing to appeal to environmentally conscious and climate-aware customers.

We’ve all probably seen AI washing at work and also, probably didn’t think that hey! That is AI washing, right there! I mean, it is common to see companies slap AI on their products even when there is little to no AI technology involved.

AI = An Indian

Back to the Builder AI story, this company’s promise of helping anyone build software was based on them giving you access to their AI software development partner called Natasha. 

I must say that Builder AI was very advanced in their product offerings, given that this is what newly released AI coding assistants are doing these days. And they were offering this two years ago!

But, there’s a big but in the way they did theirs. People have come forward to say that there was never an AI. Instead, they hired Indian software engineers to do the work that Natasha was supposed to do.

Genius use of the AI abbreviation, if you ask me.

I wonder if they ever thought, “Hey, isn’t this what freelance platforms are supposed to be for?” when they outsourced the coding.

How Round Tripping Became Involved in the Builder.ai Story

The fact that they were backed by companies like Qatar sovereign wealth fund and Microsoft gave them legitimacy and boosted their valuation. However, there are allegations of inflated sales figures, up to four times the actual figures, which is somewhat typical in the startup world. But they took it a notch higher by engaging in something called round tripping. This is the scam part now.

The allegations state that they shared invoices with another Indian startup called VerSe Innovation, essentially billing themselves  in a bid to seem like they were making sales.

According to reports, the total cost of the services rendered to each other cancelled out, when summed up. And this continued from 2021 till 2024.

More Of Builder AI’s Troubles

Amidst all these, there were allegations of money laundering amongst their top leadership. Again, this is not new in tech. Allegations of money laundering and embezzlement are kinda like a norm in the tech ecosystem. 

Another absolutely normal thing that happened during all of this was that the CEO had to step down.

Their former CEO, Sachin Dev Duggal, has been featured on publications like Forbes and was essentially the poster boy for Indian AI. However, now that things have gone sour, allegations of loan defaults in India have emerged, and it is reported that the company owes AWS for using their services. Who knew you could use the cloud on credit?

Anyways, they probably would have continued with their operations for a little longer if their creditors hadn’t frozen their assets. That was when they announced their plans to file for bankruptcy.

Finally,

This news is still unfolding and some of the information coming out are still allegations that the concerned parties haven’t confirmed.

As expected, this news has come as a sort of “I told you” moment for people, especially software engineers who are currently facing numerous job loss threats due to the recent wave of AI updates. They’re hoping that this will be the precedent for the AI bubble burst.

What do you think?