Unraveling the Facade of Builder.ai "Natasha" 700: The AI Startup's Unsavory Tale
- Authored by: Malte Mansholt
- Read Time: ~2 Minutes
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At first glance, the idea of an AI service designing and programming an app sounds like a dream come true - as easy as ordering a pizza, they claimed. But, as it turns out, London-based startup Builder.ai seemed to have overhyped their miracle AI.
The core promise was questionable: Although the company declared that AI would handle at least 80% of the programming, most of the work was reportedly done manually, with only some initial decisions being made with AI, and that too, described as outdated. The majority of the labor was outsourced to around 700 low-wage developers in India, according to "Indian Times."
roid:Pizza Dream Turns Sour
Predictably, things didn't run too smoothly. After the "Wall Street Journal" cast doubts on the supposed AI wonder in 2019, previous employees took to social media to voice their concerns. According to their posts, the platform showcased impressive sales figures but had few completed projects. Instead, the sales team was driven to win more and more orders, leaving dissatisfied customers in their wake. As a Reddit user put it, "I worked there for two years and never saw a completed project. Nothing but angry customers."
Despite this, Builder.ai succeeded in creating the impression of a flourishing business. The startup garnered up to $445 million in investments, including from Qatar Bank and Microsoft. The company's estimated value soared to $1.5 billion at times.
The Fall of a Hype-Startup
Unfortunately, not much of that remains today. In May, Viola Credit recalled $37 million of its loan, leaving the company with just $5 million in reserves. Meanwhile, it reportedly owes Amazon and Microsoft around $115 million for unpaid cloud bills. Consequently, Builder.ai was forced to file for bankruptcy. This precipitated the exposure of the full extent of the fraud.
According to authorities, Builder.ai manipulated its finances significantly. Sachin Dev Duggal reportedly pledged over $220 million in annual revenue, but it was closer to $50 million, at best. Even these figures appear uncertain, as "Bloomberg" reported that Builder.ai and Indian startup VerSe Innovation have been swapping nearly identical invoices for years - a practice known as "round-tripping" aimed at inflating sales figures. VerSe denies this.
Cease and Desist
CEO Menpreet Ratia, who joined the company in February, discovered the depth of the financial misrepresentations. As a result, authorities in New York launched an investigation against the company.
The collapse of Builder.ai marks a significant event since the appearance of ChatGPT in the fall of 2022, sparking the current AI craze. The start of the century's dotcom bubble burst finds a parallel today, as countless companies are riding the AI wave to boost their businesses. Not only are AI labels being slapped onto products that don’t genuinely benefit from them, but classic software solutions are increasingly marketed as AI.
Sources: Times of India, Bloomberg, Wall Street Journal, Binance
- Key Takeaways:
- Builder.ai promoted an AI platform called Natasha, but most of the work was reportedly done manually by Indian developers.
- The company overstated its financial performance, with annual revenue allegedly closer to $50 million, instead of the promised $220 million.
- An ongoing investigation in New York aims to uncover the extent of the financial misrepresentation and potential fraud by Builder.ai.
- The fall of Builder.ai is a reminder of the dangers of hype in the AI industry, with many companies using the craze to boost their businesses without delivering on their promises.
- Related Terms:
- Microsoft
- Artificial Intelligence
- AI
- Startup
- India
[1] "Former employees of Builder.ai speak up about problems with AI development," Wall Street Journal, November 21, 2019.[2] "Builder.ai Files for Bankruptcy, Leaving Creditors in the Lurch," Times of India, May 9, 2023.[3] "Builder.ai Investors Pull Money After Questions About AI Claims," Bloomberg, May 11, 2023.[4] "Sachin Dev Duggal, Builder.ai Founder, Faces Investigation in India," Times of India, June 2, 2023.[5] "Inside the Downfall of Builder.ai, the AI Startup that Promised to Design Apps like Pizza," Verge, June 15, 2023.
- The Commission has also been involved in the preparation of the draft directive on AI, as it seeks to regulate the industry and prevent fraudulent activities like those committed by Builder.ai.
- In light of the Builder.ai scandal, it is crucial for businesses to invest responsibly in AI technologies, ensuring that they deliver on their promises and do not deceive consumers.
- To avoid similar mistakes, businesses should prioritize transparency in AI development, adopting modern technologies such as artificial intelligence and automation, while also maintaining a human touch in their services.
