In what is the perfect potion of snake oil, hundreds of millions of dollars were invested in an AI company, which was actually fake. Seven hundred human developers in India did all the work.
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Builder.ai touted its platform as driven by an AI assistant “Natasha,” which could supposedly pump out software applications almost like Lego bricks in record time.
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But Builder.ai’s “neural network” consisted of around 700 human computer engineers based in India.
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In the industry, packaging traditional tech services as AI to secure funding is known as “AI-washing.”
“We make building an app so easy, anyone can do it,” Builder.ai proclaims proudly on its website. “Your vision. Your software. We just build it.”
Inspired slogans convinced a bunch of investors, including giants such as Microsoft and Softbank, that the startup was truly revolutionary, as was its flagship no-code development platform, allegedly powered by artificial intelligence (AI).
Investors couldn’t resist. Two years ago, the company raised a $250 million funding round led by Qatar Investment Authority, one of the world’s biggest sovereign wealth funds.
Microsoft also made an equity investment in 2023 as part of a strategic partnership, with Builder.ai's total valuation reaching $1.5 billion.
Lego bricks? More like a Jenga tower
The UK-based company touted its platform as driven by an AI assistant “Natasha,” which could supposedly pump out software applications almost like Lego bricks in record time.
Well, the whole idea was more like a Jenga tower – a couple of sniffs from unhappy investors and persistent auditors led to its collapse.
It turns out that a human-powered operation, rather than cutting-edge AI automation, kept the supposed “AI powerhouse” alive. In other words, Builder.ai’s “neural network” consisted of around 700 human computer engineers based in India.
Now, after a key lender, Viola Credit, withdrew $37 million from its accounts, leaving a mere $5 million in restricted funds and effectively paralyzing operations in five countries, the company had no choice but to file for bankruptcy.
“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,” Builder.ai said in a post on LinkedIn.
Generic wording is probably the only choice in this situation, but it hides an ugly truth – the whole farce lasted for eight years.
Trillions are at stake
Moreover, documents reviewed by Bloomberg showed that Builder.ai had been falsely increasing its revenues and reporting the inflated figures to giddy investors, even though a simple search on Reddit would have revealed what was really going on.
According to multiple former employees, the company – called by someone “The Theranos of AI” – may have only employed humans rather than AI from the very beginning. Besides, employees seem to have been drastically underpaid.
Essentially, in what is a terrific example of hype over substance, Builder.ai used the AI domain name to commit fraud and hired a large number of low-cost developers – most now without this particular job – to pretend to be AI.
In the industry, packaging traditional tech services as AI to secure funding is known as “AI-washing” whereas in reality, there’s a significant gap between the promise and actual capability.
Surely, Builder.ai cannot be the only startup involved in such marketing gimmicks that can be costly to investors. Indeed, many AI companies are still expanding without robust financial oversight or genuinely unique products.
A new UN Trade and Development report projects the global AI market will soar from $189 billion in 2023 to $4.8 trillion by 2033. When that much is at stake, we should have no time for AI-powered phonies.
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