A high-profile tech startup that marketed itself as a revolutionary AI platform for building apps has been exposed for operating under false pretences. Builder.ai, founded in 2016 by Sachin Dev Duggal, positioned itself as a no-code platform that used artificial intelligence to build custom software. But behind the slick marketing and billion-dollar valuation, the company was relying on 700 Indian engineers to manually write code—while clients and investors were led to believe it was all being done by an AI assistant.

At its peak, Builder.ai—formerly known as Engineer.ai—claimed to make software development “as easy as ordering pizza”, powered by its flagship AI tool Natasha. The startup raised more than $450 million, with a valuation touching $1.5 billion, backed by tech and financial giants including Microsoft, the Qatar Investment Authority, SoftBank’s DeepCore, and the IFC.

The AI That Wasn’t

Builder.ai’s pitch to the world was simple: let AI build your app, quickly and affordably. Its supposed innovation, Natasha, was touted as the secret sauce that automated software development. But insiders and investigators discovered that the AI capabilities were grossly exaggerated. Natasha was little more than a front-end interface that captured client inputs before the heavy lifting was sent to large engineering teams in India, who would write the code manually.

Former employees revealed that “there was no real AI”—a sentiment echoed by Robert Holdheim, a former executive who sued Builder.ai for $5 million. He claimed he was fired after raising concerns about deceptive practices and misleading marketing to investors. Internal documents showed that apps were advertised as being “80% built by AI” when in fact, the tools behind Natasha were barely functional.

Things took a sharper turn in early 2025 when Manpreet Ratia replaced Duggal as CEO in a last-ditch effort to regain credibility. What he found was alarming. Builder.ai had claimed $220 million in revenue for 2024, but an independent audit revealed the actual figure was closer to $50 million.

The financial manipulation prompted Viola Credit, a lender, to seize $37 million from Builder.ai’s accounts. Left with just $5 million in restricted funds, the company was no longer able to meet payroll or maintain global operations.

In a rare public admission, Builder.ai published a statement on LinkedIn, acknowledging its failure: “Despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position.”

Bankruptcy filings have now been initiated in jurisdictions where the company operated, including India, the United Kingdom, and the United States. Nearly 1,000 employees have been laid off, and several client projects remain incomplete.

More Than Marketing: Allegations of Fraud

The fallout doesn’t stop with misrepresentation. Builder.ai is now under scrutiny for possible financial misconduct, including round-tripping—a tactic where revenue is inflated through circular transactions—with Indian tech firm VerSe. These moves allegedly helped the company project inflated growth to attract fresh funding.

Reports also indicate that Builder.ai owes $85 million to Amazon and $30 million to Microsoft for unpaid cloud services. A US federal investigation is now underway, with authorities seeking access to financial data and client contracts.

The Builder.ai scandal is now at the centre of a broader reckoning over “AI washing”—a growing trend in which startups exaggerate or falsify their AI capabilities to secure investments.

Phil Brunkard, Principal Analyst at Info-Tech Research Group, remarked: “Many of these so-called AI firms scaled on narrative, not infrastructure. They lacked the technical backbone or governance to deliver on what they promised.”

With regulators turning a sharper eye toward AI claims in marketing, Builder.ai has become a cautionary tale for founders, investors, and the broader tech ecosystem.