That revelation was one of the factors that ultimately led the lenders to seize most of the UK-based AI startup’s cash, the people said. The company, valued at about US$1.5 billion in its last fundraising round, is now planning to file for bankruptcy, marking the biggest collapse of an AI startup since ChatGPT’s 2022 release ushered in a surge of investment in the industry.
Builder.ai’s founder and former Chief Executive Officer Sachin Dev Duggal hasn’t responded to several requests for comment via phone and email. Builder.ai and Viola declined to comment. Representatives from the other members of the creditor consortium didn’t respond to requests for comment.
The board was first alerted that something was amiss in December, when Duggal came back asking for more funds after the loan, one of the people said. It conducted another round of due diligence and found that revenue was actually on track to be near US$100 million, the people said.
By February, the Builder.ai board had pushed out Duggal and authorised a US$75 million injection into the company, one of the people said. It appointed Manpreet Ratia — an executive from its investor Jungle Ventures — as CEO and assigned an independent auditor to go through the books. That audit revealed that the final revenue figure for the year was about US$50 million, the people said.
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At that point, the creditor consortium seized the cash in the company’s bank accounts, about US$37 million.
Builder.ai, whose platform lets businesses quickly create custom smartphone apps, was an early success story for European tech, raising funds from Microsoft Corp. and the Qatar Investment Authority. The World Bank Group’s International Finance Corp., Hollywood mogul Jeffrey Katzenberg’s WndrCo, Lakestar and SoftBank Group Corp.’s Deepcore incubator have also invested in the company.
In a letter Tuesday to employees that was shared with Bloomberg, the company said it was “unable to recover from historic challenges and past decisions that placed significant strain on its financial position.” Builder.ai said it will appoint an administrator to oversee the process.
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Bloomberg reported in March that multiple former Builder.ai employees had alleged that the company inflated sales figures on several occasions by more than 20% than actual bookings. These former workers asked not to be identified discussing private information.
Ratia had said at the time that discounts the company provides to customers may account for discrepancies in its sales reporting.
When asked whether the company was treating the inconsistencies as a potential fraud, a company spokesperson in March said it had “strengthened our internal policies and governance processes to ensure transparency and best practices at every level of the business.”
