Microsoft-Backed Builder.ai Files for Insolvency After Inflated Sales

Remember that AI unicorn everyone was raving about? The one backed by Microsoft, Qatar Investment Authority, SoftBank, and a Hollywood exec or two? Yeah, that one—Builder.ai. Well, it’s officially circling the drain. Just two years ago, Builder.ai was living the dream: a $250 million funding round, a billion-dollar valuation, and glowing headlines about its no-code app-building platform. Fast forward to now, and the same company is filing for insolvency in multiple countries after a hot mess of inflated revenue claims, aggressive debt use, and investor whiplash. And yes, auditors are back in the headlines. Again.

Cooking the Books

Back in 2023, Builder.ai was already showing cracks. Whispers around the watercooler (and by that, we mean ex-employees talking to Bloomberg) suggested the company was inflating revenue by over 20%, mostly by counting non-finalized deals as done and dusted. By early 2024, it all hit the fan. Builder.ai restated its 2023 revenue down to $140 million and slashed H2 2024 projections by a solid 25%. That’s not a rounding error—that’s a full-blown "we-might-not-have-that-money" situation.

What did the company do? They brought in the big guns: two Big Four auditors were hired to comb through two years of accounts. A classic “trust me, bro” move turned into “get Deloitte on the phone.” This isn’t the first time inflated sales have landed a company in hot water. This reminds professionals that early detection of revenue recognition shenanigans could save stakeholders from disaster. Yet here we are, same rodeo, different AI horse.

What’s left of it

Turns out Builder.ai didn’t just have accounting hiccups—they had a full-blown liquidity crisis. In May 2025, CEO Manpreet Ratia confirmed that Viola Credit, which had extended a $50 million debt facility, swooped in and seized $37 million from the company’s accounts. That left Builder.ai with just $5 million, all of which is tied up in Indian accounts thanks to cross-border cash restrictions. That $5 million? It can't even be used to pay employees. Ratia made the hard call: most of the staff were let go. That’s not just a bad day at the office—it’s a rug pull for hundreds of workers and a wake-up call for the AI startup ecosystem.

Who’s feeling the burn?

• Investors: Microsoft, QIA, SoftBank, IFC, and even Jeffrey Katzenberg’s WndrCo all backed this rocket. And now, it’s headed for a legal tailspin. Don’t expect a happy ending or quick ROI.
• Creditors: With insolvency filings expected across the UK, US, India, UAE, and Singapore, creditors will need to navigate vastly different legal frameworks. UK laws allow administrators to run the show; US rules let management stay—kind of like choosing between watching a storm from indoors or steering the ship in it.
• Debtors: If you owed Builder.ai money, you might have just won the weirdest lottery. Depending on the proceedings, you may not have to pay up, or you could get dragged into legal gymnastics about contract validity.
• Employees: A company with global reach and high ambitions is now unable to meet payroll. For finance and HR professionals, that’s a nightmare that even QuickBooks can’t clean up.

Lessons for the Professionals

So, what can finance, tax, and accounting professionals walk away with from this AI trainwreck? Let’s break it down:

• Revenue recognition rules exist for a reason: Inflating top-line numbers with “almost-closed” deals is like counting your fantasy football wins before kickoff. It’s bad accounting, and regulators are watching.
• Investor due diligence can’t just ride the AI hype: Just because a firm uses buzzwords like “no-code” and “AI-powered” doesn’t mean the books balance. Even Microsoft’s backing shouldn’t replace solid forensic reviews of financials.
• Auditor independence matters: The fact that Builder.ai brought in two Big Four firms to audit their past books suggests internal teams either didn’t catch or couldn’t challenge shady estimates. Forensic professionals, take note: having independence and access is half the battle.
• Liquidity management: It doesn’t matter how much you raise if it’s misused or overly leveraged. Being asset-light doesn’t mean you get to be compliance-light.

Final Thought

Builder.ai's implosion isn’t just another flash-in-the-pan startup story. It's a case study in what happens when aggressive revenue tactics, unchecked optimism, and VC FOMO collide. For accounting, tax, and finance professionals, it’s a reminder that good governance isn’t optional—it’s a survival tactic. So, the next time someone says, “Hey, this AI startup is the next big thing,” ask to see the ledger. Because in the end, what’s on the books always beats what’s in the pitch deck. Join thousands of finance professionals who read MYCPE ONE Insights—subscribe now.