(Bloomberg) — Builder.ai, the British artificial intelligence startup backed by Microsoft Corp. and the Qatar Investment Authority, is filing for bankruptcy after the chief executive officer said a major creditor had seized most of its cash.
Viola Credit, which provided $50 million in debt to the software firm last year, has seized $37 million from Builder.ai’s accounts, leaving the company with $5 million, Builder.ai Chief Executive Officer Manpreet Ratia said in an interview Tuesday, without giving a clear reason for the seizure. Viola didn’t immediately respond to a request for comment left after business hours.
The company, which operates in five jurisdictions — the UK, the US, India, the United Arab Emirates and Singapore — will file for bankruptcy in due course, following each region’s process, Ratia said.
With the startup short on cash, Ratia said he’d made the difficult decision to let go of most of Builder.ai’s employees. The company’s remaining $5 million is located in Indian accounts and couldn’t be used to pay workers due to restrictions on the movement of money out of the country, he said.
The proceedings mark a stunning fall from grace for a company that two years ago raised a $250 million funding round led by QIA, one of the world’s biggest sovereign wealth funds. Microsoft also made an equity investment in 2023 as part of a strategic partnership. Less than two months ago, Builder.ai confirmed to Bloomberg News that it had been forced to lower sales estimates provided to investors and had hired auditors to examine two years of accounts. This came in response to questions from Bloomberg about former employees’ concerns that the company inflated sales figures.
Builder.ai’s missteps show the risks inherent in the rush to back promising AI startups, as investors seek to replicate the success of heavyweights such as OpenAI and Anthropic. After the debut of ChatGPT, London-based Builder.ai rode investor enthusiasm for AI to attract big-name investors.
The firm’s founder, Sachin Dev Duggal, stepped down as CEO in February and was replaced by Ratia. At the time, Builder.ai also cut its board to five seats from nine, and asked Duggal to relinquish four of the five seats he controlled.
“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 statement Tuesday. The firm will appoint an administrator to manage the company’s affairs, it added.
Microsoft and QIA didn’t respond to requests for comment.
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.
Insolvency cases in the UK, where Builder.ai is based, and in countries with similar laws are different from bankruptcies in the US. UK insolvencies are typically overseeing by a court-approved administrator who works directly with creditors, bypassing current managers. In the US, managers stay in place and any major decisions, like selling assets or borrowing money, must be approved by a federal judge.
The two systems both typically require creditors to vote on any reorganization plan.
Established in 2016, Builder.ai offers a platform for businesses to create custom smartphone apps while requiring little or no coding, allowing a faster turnaround than traditional outsourcing of software projects.
–With assistance from Steven Church.
(Updates with details from CEO interview starting in the first paragraph and throughout)
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