Builder.ai, a London-based AI startup bound for bankruptcy, allegedly colluded with Indian social media startup VerSe Innovation to fabricate business deals and present artificially inflated sales figures to investors.
The two companies regularly billed each other for nearly the same amounts even though neither of them actually provided the products and services in a practice known as ‘round-tripping’, according to a report by Bloomberg.
Builder.ai is a platform used to build apps and software using AI with “no tech knowledge needed.” In May this year, the company announced that it was planning to file for bankruptcy after lenders decided to seize most of its funds.
Once valued at $1.5 billion, Builder.ai is one of the most prominent AI startups to fail amid an investment frenzy first sparked by the launch of ChatGPT in 2022. Its collapse serves as a stark reminder of the risks involved in rushing to back the next OpenAI or Anthropic.
VerSe Innovation, on the other hand, is the Bengaluru-based parent company of popular news aggregator app DailyHunt, which reportedly has more than 350 million monthly users.
Over four years, Builder.ai reported receiving nearly $60 million in revenue from VerSe for services such as app development. The AI startup, in turn, transferred funds to VerSe and its subsidiary, Quark Media Tech, for services such as marketing, as per the report.
Although the transfers didn’t happen at exactly the same time, both Builder.ai and VerSe received nearly the same amount from each other, Bloomberg reported.
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However, Umang Bedi, one of the co-founders of VerSe, has dismissed the allegations of round-tripping as “absolutely baseless and false”. “We’re not the kind of company that is in the business of inflating revenues,” he was quoted as saying by the business news outlet. “There is no correlation on any timing of any payment to any partner,” he added.
VerSe’s investors include Goldman Sachs and Google. In 2022, the startup raised $805 million from the Canada Pension Plan Investment Board and other investors at a $5 billion valuation.
Meanwhile, Builder.ai has been backed by Microsoft, Insight Partners and the Qatar Investment Authority (QIA), one of the world’s largest sovereign wealth funds. In 2023, Microsoft had announced that Builder.ai’s solutions would be integrated with its cloud and Teams.
Builder.ai’s founder Sachin Dev Duggal exited the company in February this year. He was replaced by Manpreet Ratia as CEO. “With no viable alternatives, the Board has made the extremely difficult decision to enter into insolvency,” Ratia reportedly wrote in an internal email a few months later.
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