The recent collapse of London-based startup Builder.ai has sent shockwaves through the tech world, exposing a harsh reality behind one of the most hyped AI ventures of recent years. Once celebrated as a revolutionary “no-code” platform that promised to let users build apps as easily as snapping together Lego bricks, Builder.ai’s true story is far less glamorous.
The Promise vs. The Reality
Builder.ai attracted major investments, including $445 million from big names like Microsoft, by pitching its platform as powered by cutting-edge artificial intelligence. The company boasted a virtual assistant named “Natasha” that would quickly generate software, democratizing app development for everyone.
However, according to Bernhard Engelbrecht, founder of Ebern Finance, the truth was starkly different. Rather than relying on AI to build apps, Builder.ai employed around 700 engineers in India who manually wrote code based on customer requests. Though marketed as AI-generated, much of the work came down to human labor behind the scenes. Engelbrecht summed it up bluntly: “It looked like real AI—except it wasn’t.”
This manual coding approach led to numerous problems. Many apps delivered were buggy and hard to maintain, undermining Builder.ai’s promise of fast, reliable software creation.
Financial Collapse
The cracks in Builder.ai’s model soon translated into financial distress. Earlier this year, the company defaulted on a $50 million loan from Viola Credit. The lender responded by seizing $37 million from Builder.ai’s accounts, leaving it unable to pay staff or continue normal operations. Regulatory issues also froze other funds in India, further straining the business.
As of now, Builder.ai is under formal insolvency proceedings in the UK. A court-appointed administrator is tasked with managing the company’s remaining assets and exploring recovery options. In a LinkedIn post, Builder.ai acknowledged that past decisions had led to its downfall and expressed gratitude to its employees and partners during this challenging period.
Lessons from Builder.ai’s Fall
The downfall of Builder.ai shines a light on some broader concerns around the current AI startup boom:
- Hype vs. Reality: The rapid excitement around artificial intelligence often outpaces actual technological capability. This can lead to inflated promises that aren’t backed by robust tech.
- Investor Risks: Many investors may back startups based on appealing narratives without fully understanding the underlying technology or business model.
- Business Model Weakness: Rapid growth without a solid foundation can leave companies vulnerable once initial funding or hype fades.
Phil Brunkard of Info-Tech Research Group told Business Today that many AI startups are growing too fast without genuinely innovative technology or sustainable business plans. Builder.ai’s story is a cautionary tale about prioritizing marketing over substance and the dangers of overpromising results.
Final Thoughts
Builder.ai was once seen as a shining example of AI-driven innovation in app development. Instead, its collapse reveals how important it is for startups—and their investors—to look beyond flashy claims and verify real value and capability.
The “AI App Builder” turned out to be a large team of human engineers doing manual coding in India, not a seamless AI-powered solution. For now, Builder.ai stands as a reminder that not all that glitters in tech is gold—and that building software still takes more than just hype.
External References
- https://www.storyboard18.com/digital/london-ai-startup-builder-ai-collapses-after-human-powered-tech-revelation-68299.htm
- https://www.bloomberg.com/news/articles/2025-05-30/builder-ai-faked-business-with-indian-firm-verse-to-inflate-sales-sources-say
- https://www.outlookbusiness.com/artificial-intelligence/builderai-dailyhunt-parent-accused-of-inflating-sales-with-no-real-services-read-here
