After AI unicorn Builder.ai told employees it had collapsed into insolvency on a company-wide call earlier this week, CEO Manpreet Ratia sent a memo to investors blaming the collapse on its lenders’ “unexpected and irreversible” actions.
Backed by Microsoft, Insight Partners and Qatar’s sovereign wealth fund, Builder — which uses AI to help clients build customised apps — has raised more than $500m since launching in 2016.
Fresh details of an internal investigation at Builder emerged on Friday, revealing how "potentially bogus" sales had been logged and revenue forecasts slashed before the company collapsed.
In a leaked memo seen by Sifted, recently-appointed Ratia laid out the company’s financial situation, claiming Builder’s turnaround had been on track since he took the reins in March.
Read the memo in full below:
I’m writing to share some difficult news. As of today, Builder.ai has entered into insolvency proceedings and will begin working with an appointed administrator to manage the process going forward. This is not the outcome we wanted, especially given how far the business had come in just a few months.
Since the leadership reset in March, we made real progress. Operating expenses were reduced from $40M to $21M per quarter. Margins improved more than 5x. Cash burn (excluding one-offs) was halved from $32M to $16M. We had $7M in new bookings ready for contract execution and had already achieved 74% of our Q2 revenue target with half the quarter still to go. But despite this turnaround, last week our senior lenders took unexpected and irreversible action. This is an extremely unfortunate outcome, particularly given the significant strides we’ve made to turn the business around over the past few months.
To give you the full picture - in October 2024, Builder.ai drew down a $50M secured debt facility from a consortium of lenders; Viola Credit, Attempo and Cadma. During the rescue financing $75M insider round in March 2025, we worked closely with the lenders to restructure this facility. They also gave repeated verbal assurances of their support for the turnaround.
Regrettably, those assurances were not honoured.
Last week, the lenders cited technical covenant breaches, swept over $40M in cash from our accounts, and restricted all access to funds, effectively shutting down our ability to operate. Most critically, this left us unable to meet payroll or other operational commitments due this week. Despite ongoing engagement, they insisted on full repayment, leaving the Board with no viable options. More critically, by enforcing this action, they have jeopardized the AWS payment plan, under which we had negotiated a 50% discount on $88M in overdue payables. The plan was structured to be cleared in four installments of $10M each over the next 18 months. As a result, we are now in breach of this agreement as well.
After exhausting all paths, we had no choice but to initiate insolvency proceedings.
We are now working with the administrators to manage the transition in an orderly way - to protect customers, employees, and any remaining value in the business. We’re also ensuring that all IP and data obligations are handled appropriately, and we will support any interest in acquiring assets or business lines where possible.
This is not the end we worked for, and I want to sincerely thank you for your belief, commitment, and backing during the journey. We’ll keep you updated as the process continues.
Manpreet
This article has been updated to reflect new details of a reported internal investigation at Builder.ai.
