The UK’s plan to put AI innovation centre stage has been dealt a blow by the collapse of the London-based startup, Builder.ai.
Builder.ai had been one of the world’s most hyped, no-code AI platforms. It had also raised $445m in funding from the likes of Microsoft.
Two weeks ago, though, the company filed for insolvency proceedings in the UK, following the relevation that much of its platform had been powered not by AI, but by 700 human engineers.
It’s also accused of working with the Indian social media startup, VerSe Innovation to fabricate some business deals.
AI hype has gripped startups and sole traders this year. But with many reportedly already regretting replacing staff with the tech, Builder.ai’s invisible, human workforce is the latest in a number of AI cautionary tales for founders.
What was Builder.ai and why did it attract so much attention?
Builder.ai had sold itself as a platform for users to build custom apps without needing to know how to write code. Its software was allegedly powered by AI, with users giving instructions to a virtual assistant called “Natasha.”
With software development currently one of the most in-demand skills on the job market, it’s no surprise that Builder.ai was wildly attractive to investors. The promise of faster, cheaper, and automated development was too good to pass up in a market worth billions.
Between 2018 and 2023, Builder.ai secured an impressive $445 million in VC funding. Backers included high-profile investors like Microsoft and the Qatar Investment Authority (QIA).
Microsoft’s involvement elevated the company to unicorn status, with Builder.ai securing a valuation of $1.5bn in 2023, as well as global recognition as a leading AI innovator.
What went wrong?
Despite numerous successful rounds of funding, there were early questions raised about Builder.ai’s credibility.
A 2019 report in the Wall Street Journal burst Builder.ai’s (then known as Engineer.ai) bubble by debunking its claims to use AI for software development. It turned out that the app was largely powered by an assembly line of human developers in India, responding to user requests in real-time. The promise of AI-powered app development was a gimmick.
This revelation, combined with claims of fake customer reviews and logos of companies they hadn’t worked with advertised on their site, left a stain on Builder.ai’s reputation.
More trouble followed in the form of scrutiny surrounding their accounts and a leadership shake-up. Last month, the game was up, as the company filed for insolvency.
The AI hype trap
The tale of Builder.ai’s rise and fall represents the dangers of the AI hype cycle. To remain competitive, many startups are being told they must engage with new AI technologies in their operations, from recruitment to advertising.
In our survey of 531 SME leaders, conducted at the end of last year, we found that 82% felt under pressure to adopt emerging technologies.
But often, AI solutions need human talent to succeed. While AI tech is certainly impressive, many brand-new platforms are still evolving, so it’s warranted to feel sceptical about it.
Before betting your business on an AI website builder or platform, it’s essential to test, validate, and ask crucial questions around how effective a tool really is, particularly if it’s still in demo mode.
What’s the lesson for founders in the AI era?
AI is by no means a magic pill for success. It’s worth remembering that many “AI-powered” tools still depend on human input to work well. As a founder, it’s important that you take the time to research what a platform actually does before diving in headfirst.
That said, AI’s rapid adoption isn’t without good reason. There are plenty of practical applications from emerging AI startups that do add real value to your business when used thoughtfully.
That’s particularly true for sole traders, who might lack the team resource to scale quickly and depend on technology to automate many of their processes.
As the government pushes for AI innovation in its AI Action Plan, it’s important to remember that while this space is evolving quickly, adopters should embrace it at a pace they feel comfortable with.
