Builder.ai Collapse: A Sign of AI Investment?

An expert in tech growth intelligence believes the downfall of Builder.ai reveals a growing danger of “FOMO investing.”

Builder, once a well-funded British startup, is now declaring bankruptcy due to financial difficulties. The company's insolvency follows significant investment. Microsoft and Qatar’s sovereign wealth fund invested over $500 million in the startup, which aimed to use AI to simplify software development. This funding gave Builder a unicorn status, valuing it at over $1.3 billion. However, the large investments could not sustain the business.

Builder attributed its failure to “historic challenges and past decisions” that put a strain on its finances. The business has been accused of inflating sales figures when Sachin Dev Duggal, the startup’s founder, was in charge. Duggal left his CEO position in February, remaining as “chief wizard.” Manpreet Ratia, his replacement as chief executive, told employees that the company was filing for bankruptcy because of “unexpected and irreversible action” from lenders.

Carrie Osman, CEO of growth intelligence firm Cruxy, stated that “FOMO investing” was another contributing factor. She said that technology like GenAI has been overhyped, leading investors to rush into deals without proper scrutiny and inflate valuations. She added that this warning comes during an “AI gold rush.” Since ChatGPT’s launch, investments have been heavily focused on AI companies. According to a Silicon Valley Bank (SVB) report, approximately 40% of US venture cash last year came from funds focused on AI, compared to just 10% in 2021. SVB also reported an increase in “zombiecorns,” which are unicorns with poor revenue growth and unit economics. Builder is now among them, and Osman believes more will follow.

Osman stated that companies failed to understand Builder’s true value and ROI, and did not look past the hype. She cited Zymergen, Frank, and Theranos as other examples of disastrous FOMO.