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Builder.ai, one of the UK’s best-funded technology start-ups, is entering insolvency proceedings, weeks after restating its revenues and admitting “problems” under its past leadership.
The London-based group, which is backed by Microsoft, informed employees it was filing for bankruptcy during a company-wide call on Tuesday.
The company confirmed to the Financial Times that its main unit, Engineer.ai Corporation, “will be entering into insolvency proceedings and will appoint an administrator to manage the company’s affairs”.
The insolvency is a blow to Builder.ai’s blue-chip backers such as Microsoft and Qatar’s sovereign wealth fund, which collectively poured more than $500mn into a company that claimed it could use artificial intelligence to make the process of building an app or website “as easy as ordering pizza”.
The company’s founder Sachin Dev Duggal stepped down as chief executive earlier this year but retained his board position and title of “chief wizard”.
Builder.ai said on Tuesday that it was “unable to recover from historic challenges and past decisions that placed significant strain on its financial position”.
The company’s new chief executive Manpreet Ratia told employees that Builder.ai’s senior lenders had placed the company into default and that the company’s cash reserves were seized, according to people on the call.
Ratia disclosed that the company had secured a $50mn debt line in October, but its cash reserves had dwindled to about $7mn when he stepped in and joined as CEO in March.
Builder.ai was then able to raise $75mn from some of its existing shareholders to try to fix its balance sheet, according to two people familiar with its finances.
However, Ratia said on the call that the company also owed $85mn to Amazon and $30mn to Microsoft.
Ratia added that he had been trying to run the business with “zero dollars” in its UK and US bank accounts in recent days. He added that he had tried to transfer out money left in a Singaporean bank account in a bid to pay employees’ wages, but creditors had also seized this.
He said that Builder.ai therefore had no ability to make payroll in the US or UK.
Duggal came under scrutiny after the FT revealed last year that he had been named by authorities in India in relation to a high-profile criminal probe, while he also fought a series of other legal disputes during his career.
Duggal has denied wrongdoing in relation to the Indian case and his lawyers have previously maintained that he is just a witness in the case.
A person familiar with Builder.ai said that lawyers last week delivered a preliminary report stemming from an internal investigation into the company’s past financial conduct.
In April, Ratia said the company had lowered the revenues it recorded for 2023 to $140mn and that it had lowered its forecasted revenue for the second half of 2024 by 25 per cent.
Earlier this year, the FT reported that Builder.ai had drawn scrutiny for accounting practices that included relying on an auditor with long-standing links to Duggal.
Duggal, Amazon and Microsoft did not immediately respond to requests for comments.