Microsoft-backed no-code AI startup files for bankruptcy

Artificial intelligence startup Builder.ai, which has financial backing from Microsoft and the Qatar Investment Authority, has filed for insolvency in the UK, the equivalent of seeking Chapter 11 bankruptcy protection in the US.

A LinkedIn message posted Tuesday by the company, which has raised an estimated $450 million over the past seven years, stated, “today, Engineer.ai Corporation, known as Builder.ai, will be entering into insolvency proceedings and will appoint an administrator to manage the company’s affairs.”

The statement went on to say, “despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position.”

The firm added that its “immediate priority is to support our employees, customers, and partners through this difficult time. We will work closely with the appointed administrators to ensure an orderly process and to explore all available options for parts of the business, where possible. We want to extend our sincere gratitude to our employees for their commitment and hard work, to our customers for their loyalty, and to our partners and suppliers for their support over the years.”

An article published on Yahoo Finance reported that the company will be filing for bankruptcy because a major creditor “has seized $37 million from Builder.ai’s accounts, leaving the company with $5 million.” As a result, CEO Manpreet Ratia said he made the “difficult decision” to lay off most of the firm’s employees, as the remaining funds are located in accounts in India and can not be accessed to pay employees based elsewhere.

Microsoft collaboration

The firm’s entry into insolvency proceedings comes almost two years to the day since it announced a strategic collaboration with Microsoft, which included an equity investment in Builder.ai.

The collaboration, a release stated at the time, would see the two companies work together “on creating AI powered solutions that empower businesses to develop applications and become digitally native without the need for any technical expertise.”

According to that release, the deal between the two firms would “accelerate go-to-market growth of the Builder.ai platform through deep product connections across the Microsoft product ecosystem. This includes integrations across Azure OpenAI Service and other Azure Cognitive Services with Builder.ai’s software assembly line and adoption of the Microsoft Cloud and AI.”

Reality check for startups

Phil Brunkard, executive counselor at Info-Tech Research Group, said, “during the early genAI boom, we saw a surge of startups jumping on the hype without focusing on solid business fundamentals and financial practices. I am not saying that this is necessarily the case here, but with investors like Microsoft bankrolling the company, the pressure is on, and returns will be expected based on the anticipation of the market.”

He pointed out that the current market situation is such that “we have reached a plateau now, where those who overpromised their capabilities or got over-excited about the possibilities are facing a realism check and not a bank check.”

It is, said Brunkard, “crunch time for those who failed to manage expectations. Those who will stand out and survive are the ones with true differentiation, offering truly innovative solutions, solid management (from the outset), and good financial practices.”