Builder.ai Files for Bankruptcy: What Went Wrong with the No-Code AI Startup Backed by Microsoft
Builder.ai, a UK-based artificial intelligence startup once hailed as a rising star in the no-code app development industry, has filed for bankruptcy — a shocking turn for a company that raised over $450 million, was backed by Microsoft, and promised to revolutionize how software gets built.
The Fall of Builder.ai: A Quick Recap
Builder.ai operated at the intersection of no-code platforms and AI-powered software development, offering businesses the ability to build custom apps without writing code. This placed it in direct alignment with the growing no-code/low-code development trend that’s been surging across industries.
However, recent developments have revealed cracks that investors and analysts can no longer ignore:
- Viola Credit, a lender that provided $50 million in debt financing, has seized $37 million from the company’s accounts, citing undisclosed reasons.
- The remaining $5 million, stuck in Indian bank accounts due to regulatory restrictions, is inaccessible for payroll or operations.
- CEO Manpreet Ratia has confirmed mass layoffs, with most of the workforce let go.
- Bankruptcy filings will proceed across the UK, US, India, UAE, and Singapore.
- The company had previously lowered sales forecasts and hired auditors to review financial statements amid accusations of inflated revenue figures.
A Startup Once Set to Rival OpenAI in Hype
Founded by Sachin Dev Duggal, Builder.ai attracted serious attention and credibility through its strategic partnerships and investments:
- Microsoft’s equity investment in 2023 positioned Builder.ai as a serious player in enterprise AI software.
- The Qatar Investment Authority (QIA) led a $250 million funding round, making it one of the most well-capitalized AI startups in Europe.
But the startup’s trajectory began faltering under internal scrutiny, questionable financial practices, and a shift in leadership. In February 2025, Duggal stepped down and was replaced by Ratia, who also slashed the size of the board and attempted to restructure governance.
The Bigger Question: Did the Product Fail the Market?
The downfall of Builder.ai isn’t just a story of poor financial decisions — it’s a cautionary tale about product-market fit in the AI era.
Builder.ai’s core offering was a no-code AI development platform, promising to empower businesses — especially non-technical users — to create their own web and mobile apps. But here’s the twist: despite the immense promise, user adoption didn’t match investor enthusiasm.
No-Code vs. Code Assistants: A Battle of Adoption
While Builder.ai targeted non-technical users with no-code tools, the most successful AI startups in the last year — OpenAI’s Codex, GitHub Copilot, Anthropic’s Claude — have been laser-focused on coding assistants.
Why? Because developers actually want to code faster. They benefit directly from AI assistance. Non-developers, however, appear less inclined to build apps, even with no-code platforms. The promise of letting sales teams or marketers “build their own tools” sounds empowering on paper — but the real-world desire to do so is often lacking.
“More than a lack of technical skill, it seems people just don’t want to build things themselves,” said an industry analyst.
Packaging, Positioning, and the Psychological Gap
There’s also a key difference in product packaging:
- No-code tools like Builder.ai offer high control and customization — but that also means steeper learning curves and decision-making fatigue.
- AI coding assistants, in contrast, use simple prompts. Even if one prompt fails, the next one might work better. The feedback loop is quick and intuitive.
In essence, Builder.ai offered too much power, too soon, to an audience that wasn’t asking for it.
What the Collapse of Builder.ai Means for the AI Startup Ecosystem
The bankruptcy of Builder.ai serves as a stark warning: massive funding, big-name backers, and cutting-edge technology are not enough if the product lacks true market traction.
Key takeaways for investors, founders, and product leaders:
- AI tools must solve clear problems for clearly defined users.
- No-code adoption among non-engineers remains a challenge despite the hype.
- Due diligence and transparency are non-negotiable in high-growth startups.
- Financial governance is just as critical as product innovation.
A Cautionary Tale in the Age of AI Hype
Builder.ai’s rise and fall is a powerful reminder that even the most promising AI startups can collapse under the weight of poor execution, misaligned product vision, and unverified user assumptions.
As the world continues to chase the next big AI innovation, it’s crucial to ask: Does the user really want this? And will they actually use it?
