Builder AI - startup with an incredible valuation just collapsed (video, 4m)
Last week saw the spectacular collapse of Builder.ai, a British startup once valued at $1.5 billion and backed by Microsoft and SoftBank, now reduced to a value of $0. This shocking turn of events comes while many of the author’s friends are becoming billionaires by simply adding ‘AI’ to their startup names. Builder.ai promised a coding platform that required no technical expertise, which sounded enticing, but in reality, that promise was hard to deliver. Instead, they employed a room full of underpaid programmers in India to refine their 'half-baked' AI code. It turns out that, despite the marketing pitch, the true machine intelligence came from human intelligence, not artificial intelligence.
What is particularly intriguing about Builder.ai’s downfall is that the company allegedly engaged in outright fraud to bolster its profits. They operated under the assumption that technology doesn’t need to function properly to generate wealth, elevating their value to $1.5 billion before ultimately dropping back to zero. Their website even cheekily stated that “building an app is so easy that even a caveman can do it.” However, upon further investigation, it became evident that their approach was heavily reliant on human effort, which proved unsustainable and unviable in the long term.
In retrospect, it is clear that Builder.ai faced underlying issues that weren’t apparent at first glance. They launched amid a surge in AI-enabled startups, but clients expected robust technology rather than a company that couldn’t deliver on its promises. Consequently, one of their creditors uncovered fraudulent billing practices, leading to a seizure of $37 million from their bank accounts and ultimately forcing the company to declare bankruptcy.
The discussion around the rise and fall of AI startups is compelling. Online, fans and skeptics abound regarding the future of white-collar jobs in the wake of AI. The reality likely exists somewhere in between, with changes occurring gradually. The scenario plays out in a fascinating manner, as the bubble of glossy AI promises might either burst or lead to groundbreaking technologies, keeping viewers glued to their screens in anticipation.
In closing, it is worth noting the video statistics at the time of writing this article. The views have reached 880,376, accompanied by 29,362 likes. These figures illustrate considerable interest in the topic and emphasize the importance of understanding both AI technology and the market surrounding it.
Toggle timeline summary
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Builder.ai, a UK-based startup valued at $1.5 billion, has collapsed back to $0.
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The AI startup trend is growing, but Builder.ai's promise of easy software creation without technical skills failed.
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Their solution involved underpaid Indian programmers instead of effective AI tools.
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Builder.ai's collapse was also due to engaging in fraudulent practices.
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The video explores the implications for the future of AI coding startups.
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Recent AI updates have been released, including Clod 4 and DeepSeek R1.
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A new paper discusses a self-improving AI system that modifies its own codebase.
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Builder.ai highlighted the potential for wealth without functional technology.
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They marketed their app-building ease but relied heavily on human intervention.
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The startup allegedly engaged in round-trip billing to inflate revenue.
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A creditor discovered the fraud and seized $37 million, leading to bankruptcy.
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The discourse around AI's impact on jobs is polarized between optimism and skepticism.
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To utilize AI tools effectively, understanding their underlying functions is crucial.
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The sponsor offers a free course on how AI works, starting with model building.
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Closing remarks encouraging viewers to engage with upcoming content.
Transcription
Last week, Builder.ai, a UK-based startup once valued at $1.5 billion, backed by Microsoft and of course SoftBank, has collapsed back to $0. This comes at a time when literally all my friends are becoming billionaires by putting the letters AI in front of their startup names, but the party can't go on forever. Like most startups out there nowadays, Builder.ai offered a vibe coding platform called Builder Studio that promised to make you software without any technical expertise required, but as it turns out, that promise is hard to keep in reality, and I kid you not, their solution to half-assed AI code was instead to use a room full of underpaid Indian programmers to massage the slop into a working demo. In other words, it's an artificial intelligence tool powered by biological intelligence. As ridiculous as that sounds though, it's not the main reason Builder.ai collapsed. They were also engaging in outright fraud to make their mur go burr. In today's video, we'll find out what went wrong and what it means for the future of AI coding startups. It is June 3rd, 2025, and you're watching The Code Report. It's been a wild few days for the AI enthusiast. Clod 4 was released, and it made Clod 3.7 slightly better. Then just after that, DeepSeek R1 gets an update that makes DeepSeek R1 slightly better. We're not talking about exponential runaway intelligence here, which is kind of disappointing, but we'll take what we can get to keep the hype train going. But maybe we'll go exponential soon because a new paper just dropped describing the Darwin Godel machine, a self-improving AI system that iteratively modifies its Python codebase to validate its own coding capabilities on software engineering benchmarks using frozen foundation models. It sounds kind of like Google Alpha code, but if it actually works, we really are cooked this time. But if your goal is to make money, the most important lesson to remember is that your tech doesn't actually need to work to get super rich. Builder.ai used that wisdom to create a product that quickly went from $0 to $1.5 billion, then back to $0 again, and on the website, they say, we make building an app so easy that even a caveman can do it. The way it works is that you prompt it just like ChachiPT, then a professional human-powered vibecoder steps in to fix all the slop. It's the perfect platform for people not talented enough to vibecode. The problem, though, is that their approach doesn't scale, and apparently the room full of Indian programmers was doing more work than the AI. That's not a good look, but the main reason they went bankrupt is that they were also committing outright fraud, allegedly, with a round-trip billing scheme with one of their partners. They were invoicing for work they never did to make their revenue go up. It's grow or die, but unfortunately one of their creditors found out and seized $37 million from their bank accounts, and that left them no choice but to declare bankruptcy. It seems like everywhere you go on the internet right now, you'll find clueless optimists saying that 90% of white-collar work will be eliminated by AI within the next five years, to which the clueless pessimists respond by saying that AI is nothing more than the latest Silicon Valley pyramid scheme. The truth is likely somewhere in the middle, and it's going to be fun to watch this bubble pop like 2001 or explode into the singularity. Either way, it's a win. But the best way to get the most out of these AI tools is to learn how they work under the hood, and you can start doing that today for free thanks to this video's sponsor, Brilliant. Their How AI Works course teaches you how to build your own language model from scratch. It's starting with simple text prediction before scaling up to more advanced topics like image manipulation. Each lesson is designed to be highly interactive, so you develop critical thinking skills through problem solving, not memorizing. Try everything Brilliant has to offer for free for 30 days by visiting brilliant.org slash fireship, or scan the QR code on screen to get 20% off a premium annual subscription. This has been The Code Report. Thanks for watching, and I will see you in the next one.