Builder.ai, the UK-based artificial intelligence startup once praised for "building applications as easy as ordering a pizza," has recently declared bankruptcy, causing shockwaves in the industry. This star company, which had raised over $450 million from giants like Microsoft and SoftBank and was once valued at over $1 billion, ultimately collapsed due to a broken capital chain, leaving many to sigh.
According to reports, an investment firm seized $37 million from Builder.ai's account, leaving only $5 million in operational funds, triggering a default decision by the priority lender. The tight cash flow forced CEO Manpreet Ratia to close the company and file for bankruptcy. Ratia candidly told the Financial Times that the company "couldn't recover from past challenges and decisions," and revealed that their accounts in both the U.S. and the U.K. were once "completely empty."
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Notably, Ratia took over as the leader of Builder.ai earlier this March, replacing former leader Sachin Dev Duggal. Reports indicate that during Duggal's tenure, he exhausted the increasingly dwindling funds of the company and left behind hundreds of millions of dollars in debt. Additionally, Duggal was embroiled in money laundering investigations by Indian authorities, though he denied the charges and claimed himself as just a witness. The Financial Times also pointed out that Duggal heavily relied on the services of an auditor with whom he had a close personal relationship, laying hidden risks in Builder.ai's financial situation.
It remains unclear what factors directly led to Viola Credit seizing loans from Builder.ai, but it is widely speculated outside that this move may be related to its anticipation of Builder.ai's financial crisis.
The bankruptcy of Builder.ai undoubtedly sounded an alarm for the overheated artificial intelligence industry. Although last year artificial intelligence companies accounted for 40% of total U.S. startup funding, the vast majority have yet to turn a profit. Many AI startups struggle to find stable revenue sources, with some even accused of misleading investors and overstating the profitability of their AI technology. For instance, after Ratia took office, Builder.ai significantly cut its revenue expectations for the second half of 2024 by 25%. Earlier, the company was also exposed for attempting to pass off manually developed software as AI.
Facing challenges such as rising costs and frequent "hallucinations," investors' patience for AI companies is gradually fading. The case of Builder.ai may become a significant turning point in the development of the AI industry, signaling a shift towards more practical applications and sustainable development.