700 Human Employees Behind the AI... The Startup That Fooled Even Microsoft [Tech Talk]

Claimed to Be AI... But There Were People Behind the Homepage
Industry Flooding the Market With Unreliable Features... "AI Is Not a Cure-All"

The artificial intelligence (AI) app development startup Builder AI, which once attracted global attention, filed for bankruptcy last month. Just a few years ago, this company secured investments worth hundreds of millions of dollars from major global investors such as Microsoft (MS) and the Qatar Investment Authority. However, it has since been revealed that Builder AI had inflated both its revenue and technological capabilities. The AI technology at the core of its business did not actually exist, and there is evidence that over 700 Indian developers were posing as AI.

Sachin Dev Duggal, founder of Builder AI (left), and the Builder AI logo. Instagram, Builder AI homepage screenshot

Builder AI was founded in 2016 by British-Indian entrepreneur Sachin Dev Duggal. The company gained attention in the global tech industry for automating smartphone app development using AI. In 2023, MS, along with the Qatar Investment Authority, invested $450 million in the company, and Builder AI quickly rose to unicorn status, being valued at over $1 billion.

However, the company began to collapse rapidly afterward. Founder Duggal stepped down as CEO in February due to allegations of financial misconduct, and on May 20, accounting fraud was uncovered. Builder AI had been inflating its revenue figures in reports submitted to the UK Companies House for several years.

Following this, several foreign media outlets, including Bloomberg, interviewed former employees of Builder AI and uncovered a surprising truth: there was no "AI that builds apps" at Builder AI. When orders were received, human developers manually created the apps and delivered them to customers.

Claimed to be AI... but there were people behind the homepage

Actual service screen of Builder AI. Contrary to the promotion of utilizing artificial intelligence, there are many limitations, such as development schedules taking several days or more. Builder AI homepage

Builder AI operated with its headquarters in the UK and a development branch in India. In particular, more than 700 developers were employed in India, making it the de facto core business site. When customers placed an order for a specific app with "Natasha," the so-called app development AI, Indian developers would spend 6 to 7 months manually building the finished app before delivering it to the customer. This stands in stark contrast to code automation AI, which typically produces a finished product within 1 to 3 minutes.

In other words, Builder AI was not an AI company but merely an app development outsourcing firm. MS and the Qatar Investment Authority ended up investing large sums not in cutting-edge AI, but in more than 700 Indian developers.

While not a case of false advertising like Builder AI, Amazon has also previously exaggerated its own AI capabilities and faced embarrassment. The 'Amazon Go' system, which automatically processes payment when a customer selects items and leaves the store, is a representative example. Amazon once claimed that Amazon Go was fully automated through AI technology, but in April 2024, the true nature of the system was revealed by the US business media outlet "The Information."

An advertisement video promoting Amazon Go technology, where AI automatically recognizes selected products and processes payment. Amazon YouTube

Amazon Go was known for using various cameras and sensors installed in the store to identify customers and automatically process payment for selected items. While AI was used in this process, the actual level of automation was low due to errors and mistakes. In the end, Amazon hired additional staff to check the payment information for Amazon Go.

Industry flooding the market with unreliable features... "AI is not a cure-all"

The failures of Builder AI and Amazon Go serve as warnings against excessive expectations for AI. Both projects attracted massive investments at the height of the hype surrounding generative AI, but the results were underwhelming.

Some voices in the global tech industry are calling for this incident to be a moment of self-reflection. The UK tech media outlet "The Register" commented, "Even well-known companies can fail in the startup world," and added, "Companies need to reconsider how much they should rely on AI." The outlet also noted, "The current tech industry is flooding the market with a variety of features wrapped in unreliable AI. Of course, some features do work, and AI is certainly a useful tool, but we must remember that there are more cases where expectations are not met. AI is not a cure-all."