AI company that vowed to make building apps as easy as ordering pizza goes into solvency

An artificial intelligence startup, Builder.ai, which once claimed to make building apps as easy as ordering pizza, is entering insolvency proceedings and is set to appoint an administrator to manage the company’s affairs. 

In a wide call on Tuesday morning, the Microsoft-backed Artificial Intelligence startup, Builder.ai informed employees about serious financial difficulties. The insolvency process comes weeks after the company recounted its revenues and admitted past problems under its past leadership.

The startup said that it was “unable to recover from historic challenges and past decisions that placed significant strain on its financial position”.

The company’s main unit, Engineer.ai Corporation, will be entering into insolvency proceedings and will appoint an administrator to manage the company’s directories. The insolvency represents a blow to Builder.ai’s blue-chip backers such as Microsoft and Qatar’s sovereign wealth fund, which jointly poured $450 million into a company that claimed it could make the process of building an app or website “as easy as ordering pizza”. 

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Earlier this year, the company’s founder, Sachin Dev Duggal, stepped down after coming under scrutiny because a 2024 report revealed that he had been named by authorities in India concerning high-profile criminal probes. The founder had also fought a series of other legal disputes during his career. 

However, Duggal has denied wrongdoing in the Indian case, and his lawyers have previously claimed that he is just a witness in the case. 

Following allegations of inflated sales figures, the company announced a downward revision of its sales forecast for the second half of 2024 by approximately 25 per cent. In April, its new chief executive, Manpreet Ratia, noted that the company had lowered the revenues it previously recorded for 2023 to $140 million. Earlier this year, the startup had drawn serious attention for accounting practices that included relying on an auditor with long-standing links to Duggal.

“It’s time for a proper peer review to evaluate how we operate. This is a crucial step to make sure we align with the best practices in financial reporting,”  Ratia stated in April.

Builder.ai founders’ money laundering cases

Founded in 2016 by Sachin Dev Duggal and Saurabh Dhoot, Builder.ai, initially known as Engineer.ai, wants to simplify app and website development using artificial intelligence, comparing the process to ordering pizza. The company, based in London, has secured significant funds, notably a $250 million round led by Qatar’s sovereign wealth fund in 2023, amidst a surge of interest in generative Artificial intelligence technologies.

The company automates the process of building and operating software projects, enabling businesses to create, run, and scale their software without needing extensive technical expertise or coding skills. It provides a composable software development platform that helps users build and manage their apps, websites, and software solutions.

The founders’ money laundering accusations stem from transactions and activities that affected the company’s image. According to the report, Duggal’s alleged involvement in money laundering is connected to several financial dealings between 2008 and 2012, where funds from Videocon were reportedly transferred to a company he founded in India, then allegedly moved to Videocon’s international entities. 

Dhoot, on the other hand, was implicated in a case in which he was accused of participating in a scheme to secure fraudulent loans from an Indian bank. The scheme, which was allegedly facilitated by his uncle, Venugopal Dhoot, involved the misallocation of funds to various Videocon accounts. 

While the company and its lawyers clarified that the investigations do not relate to the startup itself, the developments raised questions about its leadership. Reports had also stressed that Dhoot’s role in the company was in recognition of his advisory role and friendship with Duggal, rather than as a founding member or executive.

The startup’s journey reveals risks associated with the rush to back promising artificial intelligence startups, where investors have long struggled to replicate the success of startups like OpenAI or Anthropic. After the debut of ChatGPT, the company rode investor enthusiasm for artificial intelligence startups, leading to a $250 million financing round in 2023, and has secured more than $450 million in its entire span.