the majority of the app-building work was manual.
An artificial intelligence company backed by Microsoft has collapsed after revelations that its touted ‘neural network’ was in fact a team of human engineers based in India.
Builder.ai, a London-based tech firm, had claimed its ‘Natasha’ software could use AI to design, code and deploy apps in record time.
In reality, much of the work was being carried out by over 700 Indian engineers, with only some clerical assistance from standard software.
The firm, which operated for eight years, entered insolvency in May after being publicly outed.
Microsoft had invested $455 million (£336 million) in the company, which at its peak was valued at $1.5 billion (£1.1 billion).
In a statement, Builder.ai wrote: “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.”
The scandal emerged after a report by Binance, followed by further investigations by Bloomberg, revealed the extent of the deception.
Internal sources confirmed that the majority of the app-building work was manual.
It was also reported that Builder.ai had entered into questionable financial arrangements with another tech firm, VerSe.
Documents allegedly show that Builder and VerSe billed each other regularly between 2021 and 2024, despite no actual services being provided.
The aim was to reportedly inflate revenue figures.
VerSe, a social media startup based in India, has strongly denied the claims.
Co-founder Umang Bedi said: “We’re not the kind of company that is in the business of inflating revenues.”
He described the allegations as “baseless and false”.
Despite those denials, the story has drawn widespread attention online.
The collapse of Builder.ai has sparked fresh scrutiny over inflated claims made by tech startups in the AI space, especially those attracting major investment.
The fallout has even affected unrelated companies. Builder.io, a California-based software firm, has had to clarify that it is not connected to Builder.ai publicly.
Its CEO issued a humorous post on social media, distancing the company from the controversy and winning plaudits from users amused by the mix-up.
With AI products like ChatGPT, Gemini and LLaMA now dominating the tech landscape, the collapse of Builder.ai is a stark reminder that not all companies claiming to use cutting-edge AI are delivering on those promises.
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