Builder.ai: The Rise and Fall of a Unicorn

Once celebrated as a rising star in the artificial intelligence sector with a valuation surpassing $1.5 billion, Builder.ai is now preparing to file for bankruptcy. The Microsoft-backed startup’s sudden downfall has sent shockwaves across the tech industry, highlighting vulnerabilities even among the most promising AI ventures.

According to documents reviewed by Bloomberg and individuals familiar with the matter, Builder.ai allegedly engaged in a practice known as "round-tripping" with Indian social media firm VerSe Innovation between 2021 and 2024.

Both companies are said to have routinely invoiced each other for similar amounts without actual exchange of products or services, artificially inflating Builder.ai’s revenue figures presented to investors. Sources claim this deception was key to maintaining its unicorn status.

VerSe co-founder Umang Bedi firmly denied the allegations, calling them "absolutely baseless and false," emphasizing that his company does not engage in revenue inflation practices. Meanwhile, Builder.ai’s representatives have declined to comment, and founder Sachin Dev Duggal has not responded to media inquiries.

VerSe Innovation, once backed by ByteDance with a 9.8% stake, became one of the few Indian unicorns without Chinese shareholding after ByteDance fully exited in 2022, selling its stake for $232 million during VerSe’s $805 million Series J round. Today, VerSe’s investor base includes CPP Investments, Ontario Teachers’, Google, Microsoft, and others.

Despite shedding Chinese ties, VerSe faces scrutiny over governance, with Deloitte highlighting internal control weaknesses in FY24. Recent allegations of "round-tripping" with Builder.ai, denied by co-founder Umang Bedi, add further complexity to VerSe’s financial narrative, underscoring the challenges high-growth startups face in maintaining transparency.

Amid these revelations, investors froze $37 million of remaining capital, severely constraining the company’s liquidity. With only $5 million inaccessible due to regulatory restrictions, Builder.ai could not meet operational expenses, forcing it into insolvency. Duggal resigned as CEO in February 2025, replaced by Manpreet Ratia, tasked with stabilizing the firm.

Builder.ai’s collapse marks the most significant AI startup failure since ChatGPT’s emergence in 2022, serving as a stark reminder of the pressures young tech firms face to sustain investor confidence. The incident also raises broader concerns about transparency and financial integrity in the booming AI sector, signaling the need for tighter oversight as funding surges into the space.

However, recent financial and governance concerns underscore the need for scrutiny in evaluating its long-term stability.