A billion-dollar startup, an AI illusion, and a cross-billing network of #InteligenciaArtificial
Builder.ai was, until recently, one of the most promising startups in the technological universe. Based in London and with an aggressive discourse that promised to democratize application development through artificial intelligence, it managed to seduce giants such as Microsoft and capture more than 450 million dollars in investment. But behind the facade, what was hidden was less data science and more accounting theater. Now, the company faces bankruptcy, accusations of fraud and a massive loss of credibility.
From technological promise to inflated operation
Builder.ai's value proposition seemed solid: a "no-code" platform that used artificial intelligence to build applications automatically. However, according to investigations revealed by Bloomberg, that supposed AI was little more than a screen. The real operation was in charge of more than 700 engineers in India, who manually performed what an advanced AI was supposed to do.
Even more serious is that, between 2021 and 2024, Builder.ai would have maintained a “round-tripping” scheme with the Indian company VerSe Innovation. Both businesses would have billed each other equivalent sums, without real services in exchange, with the apparent purpose of inflating their income presented to investors and lenders.
What is round-tripping and why is it so dangerous?
Round-tripping is a fraudulent practice in which two companies simulate real economic activity by exchanging payments for fictitious services. Although legal in certain contractual structures if there is commercial justification, its use to cover up income without operational support is a serious distortion that seeks to mislead the market. In this case, Builder.ai would have received payments of up to $60 million from VerSe, while returning similar figures for concepts such as marketing.
Reports indicate that these amounts were carefully programmed to avoid suspicion, although in practice they were neutralized: neither VerSe nor Builder.ai gained anything real, beyond building an illusion of billing and growth.
Builder.ai: a unicorn with feet of clay
With a valuation close to $1.5 billion and a network of investors that included Microsoft, Insight Partners and the Qatar Investment Authority (QIA), Builder.ai positioned itself as the new jewel of the post-ChatGPT AI revolution. Microsoft even planned to integrate its technology into Microsoft Teams and Azure, giving the startup a high-level validation.
But according to Bloomberg, in its desperation to maintain investor enthusiasm, the company went so far as to exaggerate its projected income for 2024 by 300%. This inflated figure was decisive for creditors to freeze their assets and precipitate the collapse.
The uncomfortable partner: VerSe Innovation
VerSe, for its part, categorically denies any fraudulent involvement. Umang Bedi, its co-founder and former director of Facebook India, stated that the services between the companies were verified by independent audits. Furthermore, he stressed that there was no synchronicity in payments or evidence of cooperation in a simulated scheme.
But leaked documents and people with access to internal information indicate that billing figures and the timing of payments suggest a pattern designed to appear as income.
What further aggravates the situation is that VerSe, valued at over $5 billion and owner of apps like Dailyhunt and Josh, was already facing questions about the strength of its internal controls. Its auditor Deloitte pointed out, in the March 2024 report, multiple operational weaknesses that could lead to significant errors in its financial statements.
Where is the artificial intelligence?
One of the most controversial points of the case is that Builder.ai was not, in essence, an artificial intelligence company. Despite its aggressive branding and its narrative based on “total automation with AI”, in practice its services were delivered manually by hundreds of developers in India. This has been interpreted by many analysts as a violation of the spirit —and possibly the letter— of the promises made to its investors.
The collapse of Builder.ai thus becomes one of the first major warnings to the market about the dangers of “cardboard AI”, that is, products that are dressed as artificial intelligence without really having that capability.
The collapse: from CEO to bankruptcy in three months
In February 2025, Sachin Dev Duggal, founder of Builder.ai, resigned as CEO. He was replaced by Manpreet Ratia, who attempted to reform the company's governance. However, just three months later, Ratia reported via internal email that the board of directors had decided to declare the company bankrupt.
The fact marks a precipitous fall of a startup that just a year ago rubbed shoulders with technological giants and appeared on lists of emerging companies with greater potential.
And the investors? Uncomfortable silence
Neither Insight Partners nor QIA have wanted to comment on the collapse of Builder.ai. Microsoft, which had publicly backed the startup and even considered it “a new category of development,” has also avoided speaking out.
This institutional silence is revealing. The appetite for finding “the next AI unicorn” led many funds to invest without due diligence, relying more on marketing narratives than on the real fundamentals of the business.
What lessons does the Builder.ai case leave?
1. The narrative is not enough
The promise of a startup must be supported by real technology. The Builder.ai case shows how easy it is to make up a product with buzzwords and hide manual operations behind a supposed automation.
2. Round-tripping does not disappear
Although it is not a new concept, round-tripping is still valid and can go unnoticed if financial statements are not analyzed in depth. This case underlines the importance of investors and auditors delving deeper beyond balance sheets.
3. AI remains a fertile ground for scams
The fever to invest in AI has opened the door to hundreds of companies that use the term without meeting the standards that it implies. The pressure to capture capital has created an environment conducive to exaggerations and fraud.
4. Due diligence is irreplaceable
External validation of the services provided, thorough review of contracts and cross-verification between billing and deliverables should be minimum standards in any serious investment round.
A scandal that is just beginning
The investigation remains open. US authorities have subpoenaed Builder.ai to provide its financial statements, accounting policies and customer lists. Although the company has chosen not to comment on this legal process, the scandal could have criminal implications if the deliberate falsification of income and fraudulent accounting practices is confirmed.
In parallel, VerSe's reputation is also in the spotlight. The closeness between its founders, billing patterns and audit reports question whether its path to an eventual IPO will be possible without a deep restructuring.
The price of technological illusion
The Builder.ai case is a brutal reminder of the risks involved in investor frenzy without fundamentals. In an environment where it is enough to mention "artificial intelligence" to capture millions, vigilance must be more rigorous than ever.
Builder.ai not only betrayed the trust of its investors, but also tarnished the image of the entire technology startup sector. The industry must learn from this case to avoid repeating the pattern: empty promises, superficial technology and made-up figures. Because, ultimately, there is no AI—or magic—that can sustain a lie for too long.
