Builder.ai’s fall and what it means for agentic AI

Has the shakeout begun?

Something important just happened in the AI startup world—not because it was unexpected, but because it finally happened.

Builder.ai, once a high-profile no-code platform backed by Microsoft and SoftBank, entered insolvency proceedings this week. The company’s statement was somber: “Despite the tireless efforts of our current team… the business has been unable to recover from historic challenges and past decisions.” Depending on how closely you’ve been watching, this may have seemed inevitable. But it also raises a broader question: are we now witnessing the beginning of a major shakeout in AI startups?

The wider trend: survival of the fittest

Builder.ai’s collapse isn’t an anomaly. Over the past year, several well-funded AI ventures have hit a wall:

• Rain AI, a Sam Altman-backed chipmaker, failed to close a $150M Series B and is exploring a sale, possibly to OpenAI.

• Forward, the AI-driven healthcare provider, shut down all operations despite raising over $650M, citing rollout failures.

• AllHere, a chatbot platform for school districts, filed for bankruptcy after its founder was charged with fraud.

• WayRay, a holographic AR company funded by Alibaba and Porsche, quietly entered bankruptcy in August 2023.

According to Carta, 254 venture-backed startups went bankrupt in Q1 2024—more than double the number from the same period in 2023. AI may still be hot, but easy money and inflated valuations have created a backlog of overpromised, under-executed ventures now coming to terms with reality.

What about agentic AI?

Interestingly, agentic AI startups—those building autonomous or semi-autonomous software agents—have so far avoided this fate. There are no publicly reported insolvencies in this space. In fact, momentum seems to be building. StackAI recently raised a substantial Series A, and open-source frameworks like SuperAGI are actively shipping. Anthropic’s Claude now offers structured agent-like behavior via its "tool use" APIs, and devs are genuinely using it (though as I write this, Claude.ai is experiencing major outages—probably just a coincidence).

But that doesn’t mean the space is immune. Most agentic tools are still in the developer exploration phase. Sustained traction—let alone revenue—hasn’t been proven at scale. The infrastructure is young. The UX remains inconsistent. And the risk, as with any new abstraction, is that early excitement may outpace actual workflows where these agents materially outperform simpler automation.

And here’s an emerging dynamic that hasn’t been talked about enough: agentic AI may actually be a threat to the no-code/low-code segment Builder.ai represented. As LLMs get better at generating structured code and chaining functions across APIs, the need for boxed platforms that abstract away programming starts to feel redundant. Developers can now build and orchestrate more sophisticated logic using tools like AutoGen, LangGraph, or Claude's tool use primitives, without waiting for no-code platforms to catch up. In that light, Builder.ai wasn’t just squeezed by macro forces—it was increasingly disintermediated by the very evolution of AI it helped evangelize.

This is where comparisons get revealing. Make.com offers a visual-first automation experience that still appeals to power users (I’m a big fan—and just published a piece about it this morning: "When no-code solutions shine"), and Zapier has leaned into its integrations and team-oriented features. Others in the same space—like OutSystems, Retool, Glide, Appgyver, and Thunkable—have focused more narrowly on specific kinds of app or workflow building. Builder.ai, by contrast, tried to be a hybrid between an app development agency and an automation platform with AI sprinkled across the stack. That blend didn’t deliver clear advantages—and came with massive operational drag.

Builder.ai as a cautionary tale

What made Builder.ai vulnerable wasn’t just macro pressure—it was strategic sprawl. The company positioned itself as part app builder, part dev platform, part enterprise services firm. That ambiguity required massive capital to sustain. And when interest rates rose and runway mattered again, the seams showed: restated revenues, internal investigations, and debts to the tune of $85M (AWS) and $30M (Microsoft).

No AI feature can fix fundamental business instability. Builder.ai bet big on a broad market and lost focus. It’s a cautionary tale, not just for founders, but for investors still chasing AI's next unicorn.

So—has the shakeout begun?

Yes. But this isn’t a crash. It’s a compression.

We’re entering a phase of market discipline. AI startups—especially those promising labor automation or dev tooling—must now prove more than a demo. They need traction, sustainability, and strategic clarity. “Move fast and break things” no longer cuts it when the capital markets want proof, not promises.

For the agentic AI ecosystem, that’s both a challenge and an opening. If you’re solving a real problem—and can outlast the hype curve—you’ve never had more leverage.

Bottom line: The era of indiscriminate AI funding is over. What comes next isn’t a bust—it’s a benchmark. And the real innovation starts there.