Builder.ai, the artificial intelligence startup that recently announced plans to declare bankruptcy, faked business with the Indian social-media startup VerSe Innovation for years to falsely inflate its sales, according to documents reviewed by Bloomberg and people with direct knowledge of the practice.
The two companies routinely billed one another for roughly the same amounts between 2021 and 2024, documents reviewed by Bloomberg show, as part of an alleged practice known as "round-tripping" that the people said Builder.ai used to inflate revenue figures it presented to investors. In many cases, products and services weren’t actually provided to either company for these payments, said the people, who asked not to be identified discussing confidential information.
Umang Bedi, a VerSe co-founder, said it was “absolutely baseless and false” that his company would have recorded expenses or billed services that it didn’t receive or provide. “We’re not the kind of company that is in the business of inflating revenues,” he said in an interview. The company said that the services bought and sold to Builder.ai have been verified by reputable external organizations. Accusations of round tripping are “defamatory and irresponsible,” and it’s incorrect to say that the companies routinely billed each other for roughly the same amount, VerSe said.
A representative for Builder.ai declined to comment.
Builder.ai, once valued at about $1.5 billion, is the most high-profile AI startup to collapse since ChatGPT’s launch started a global investment frenzy. Its downfall shows the risks inherent in the rush to back AI startups as investors seek to replicate the success of industry heavyweights such as OpenAI and Anthropic. The London-based startup, which pitched its tech as a way to make apps with little or no coding, said earlier in May it planned to file for bankruptcy after a major creditor seized most of its cash.
Bloomberg reported earlier that Builder.ai overstated its projected 2024 sales to creditors by 300%, which contributed to the lenders’ decision to seize the company’s funds. Bloomberg also reported that US prosecutors have demanded that the company hand over financial statements, accounting policies and a list of its customers as part of a subpoena. Builder.ai has declined to comment on the subpoena. The company has acknowledged it’s found discrepancies in its historical sales but has declined to comment on the scope of the alleged overstatement.
Builder.ai collected close to $60 million in revenue from VerSe in the four-year period for services such as application development, according to people with knowledge of the situation. In turn, the AI startup sent funds to VerSe and its subsidiary, Quark Media Tech, for services such as marketing, the documents show. The two companies appear to have interspersed the timing and amount of the invoices to avoid suspicion, though each firm ultimately spent approximately the same amount, according to the people and documents.
Bedi, a former managing director for Facebook in India and South Asia, said VerSe started working with Builder.ai around 2021, but denied that the companies were acting in cooperation or failed to deliver any services. “There is no correlation on any timing of any payment to any partner,” Bedi said.
Builder.ai had raised more than $450 million from investors, including Insight Partners and the Qatar Investment Authority, or QIA, one of the largest sovereign wealth funds. Microsoft Corp. invested in 2023 and announced plans to integrate the startup’s offerings with Microsoft’s cloud and Teams product. “We see Builder.ai creating an entirely new category that empowers everyone to be a developer,” Jon Tinter, a Microsoft corporate vice president, said at the time.
A representative for Insight Partners didn’t respond to requests for comment. Spokespeople for Microsoft and QIA, which also invested in VerSe, declined to comment.
In February, Builder.ai’s founder Sachin Dev Duggal stepped down as chief executive officer, although he remained on the board and retained his title as “Chief Wizard” at the nine-year-old company. He was replaced as CEO by Manpreet Ratia, an investor with Jungle Ventures, a Builder.ai backer based in Singapore. Shortly after joining, Ratia said he planned to strengthen the company’s governance and policies.
Three months after taking the role, he told employees the company planned to shut down. “With no viable alternatives, the Board has made the extremely difficult decision to enter into insolvency,” he wrote in an internal email reviewed by Bloomberg.
A representative for Duggal declined to comment.
VerSe, which is based in Bengaluru, is one of the largest consumer tech newcomers in India. VerSe has said that its news aggregation app, Dailyhunt, has more than 350 million monthly users, and it released a video app, called Josh, right after the Indian government banned TikTok. In 2022, VerSe raised $805 million from the Canada Pension Plan Investment Board and other investors in a round that gave the startup a $5 billion valuation. Goldman Sachs and Google had invested in VerSe earlier. Representatives for the Canada Pension Plan Investment Board and Goldman declined to comment. Google didn’t respond to requests for comment.
In VerSe’s financial report for the year ending in March 2024, its auditor Deloitte wrote in its opinion that the startup lacked “appropriate internal controls” over several aspects of its business, including its information technology, advertising revenue and relationship with suppliers. Those flaws “could potentially result in material misstatement” of the company’s accounts, the auditor wrote in the report, which was reviewed by Bloomberg.
Deloitte did sign off on the startup’s accounts for the year as “true and fair.” Bedi described the issues the auditor flagged as common “process control” difficulties that the company was working through and said that Deloitte found no material misstatements.
The Deloitte opinion was previously reported by the Indian publication Mint. The newspaper also reported in April that VerSe’s chief financial officer had resigned ahead of the startup’s expected initial public offering. Bedi said the CFO, Sandip Basu, left for health reasons. He said the company currently has “very little debt” and plans to break even by the second half of 2025. He said the company is speaking to potential advisers about an IPO, but doesn’t have firm plans. Basu couldn’t immediately be reached for comment.
Builder.ai founder Duggal and Bedi have cooperated publicly and Duggal has posted on social media with Bedi. In 2023, Duggal added a photo on his verified Instagram account showing him and Bedi standing together, sporting light colored blazers, in front of 10 Downing Street, the official residence and office of the British Prime Minister. “With my main man @umang.bedi at @10downingstreet for #londontechweek,” Duggal wrote, tagging Bedi’s verified account. In a later LinkedIn post, Duggal thanked Bedi for contributing to a Builder.ai gathering in Singapore as one of the “incredible speakers from the extended Builder.ai family.”
Bedi said he participated in the event via Zoom and did not travel to Singapore. He said he invested about $10,000 in Duggal’s company, which was previously known as Engineer.ai, around 2017. But Bedi said he has only met Duggal “two or three” times, noting that the London meeting was part of a broader group of tech executives and entrepreneurs. “I don't have a very close interpersonal relationship,” Bedi said. “I have a professional business working relationship.”
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