The tech world is reeling after a report found that a once-celebrated startup backed by tech giant Microsoft relied on nearly 700 human workers in India, purportedly posing as chatbots, despite marketing its services as powered by artificial intelligence.
Builder.ai, a London-based company once valued at $1.5 billion, marketed itself as an AI-driven platform that made app development "as easy as ordering a pizza."
Its flagship product, a virtual assistant named Natasha, was promoted as an AI capable of autonomously building software.
However, according to a report by the Times of India on Tuesday, the work was largely carried out manually by Indian engineers. Several other media reports indicated similarly in the past few days.
The deception began to unravel in May when lender Viola Credit seized $37 million from Builder.ai’s accounts. Bloomberg also reported that the company had exaggerated its 2024 revenue forecast by 300%.
Despite earlier concerns raised in a 2019 Wall Street Journal (WSJ) article and a lawsuit from a former executive accusing it of misleading investors, Builder.ai secured more than $445 million in funding from major backers, including Microsoft and Qatar’s sovereign wealth fund.
Its collapse has now sparked a U.S. federal investigation, with New York prosecutors seeking financial and customer records, an Anadolu Agency (AA) report said on Wednesday.
Earlier this year, founder Sachin Dev Duggal stepped down and was succeeded by Manpreet Ratia, who reportedly uncovered internal discrepancies within the company.
"London-based Builder.ai collapsed last month after an internal investigation found evidence of potentially bogus sales, with revenues previously reported under Duggal’s watch restated to just a quarter of previous estimates," an exclusive report by the Financial Times (FT) read on Thursday.
Builder.ai now reportedly faces millions in unpaid cloud computing bills to Amazon and Microsoft.
In a LinkedIn post two weeks ago, the company confirmed that it has entered insolvency proceedings, citing "historic challenges and past decisions" that have had a significant impact on its financial health.
Founded in 2016, it has close to 300,000 followers on the platform.
Some media reports said the startup "imploded spectacularly," but also suggested that its collapse has triggered "sector-wide panic."
