Builder. An influential UK artificial intelligence startup with backing from tech giant Microsoft and others is reportedly close to collapse after internal investigations into the business discovered sign of potentially inflated sales figures and misleading statements about the startup’s AI abilities.
The disclosures have rocked the European tech scene and prompted serious questions to be asked about due diligence processes as well as AI-run business models being able to deliver.
The company, which had raised more than $500 million from the likes of Qatar’s state-owned sovereign wealth fund and SoftBank, recalibrated its revenue forecast in a big way, sources tell Recode. Now, these numbers have allegedly been slashed to a fraction – around a quarter – of what had previously been claimed, sounding alarm bells among its investors.
This dramatic downward adjustment is said to have come after an internal investigation revealed a large part of the firm’s recorded sales were either fictitious or inflated.
To add to the confusion, reports have emerged that Builder. Ai may have overstated the centrality and sophistication of its artificial intelligence in its flagship product, which aspired to streamline app development.
Critics and those with the company, however, argue that 95% of the work being purportedly done by AI was actually being performed by human developers, a practice which clearly flies directly in the face of the marketing and value proposition of the company.
It’s resulted in accusations of “fake AI” and near-catastrophic loss of confidence in the company’s technology and leadership.
The financial consequences of these revelations seem to be dire. There are reports that an investment company has already moved in to pocket a large chunk — about $37 million — of Builder’s haul. ai’s books, and shortly afterward, the company entered into the transaction with very little cash left.
This has seemingly led to a default event with senior lenders, forcing the startup to the brink of collapse.
Manpreet Ratia, who became the company’s CEO in March this year, told the Financial Times the company failed “to overcome historical challenges and the long-term burden of legacy issues” that strained its cashflow.
He added that he’d been running the business with almost zero money in its US and UK account. The specifics of the “historic challenges and past decisions” have not been made public, but are believed to relate to prior “misreporting and overspend” by the former team.
The rapid decline of Builder. ai offers a cautionary lesson to the hot AI industry, where pots of money and big claims are the new normal. It also serves as a reminder of the importance of due diligence when scrutinizing tech claims and financials, particularly for startups that play in the heavily hyped AI space.
The implosion of a former unicorn will give investors more reason than ever to be cautious and to ask more questions of their portfolio companies. And in the long run, what this means for Microsoft and the other financiers who had believed in Builder. ai have not been fully legislated and analysed.
