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Sachin Dev Duggal, the founder and former chief executive of the collapsed Microsoft-backed tech start-up Builder.ai, made at least $20mn through selling shares in the business.
The self-described “chief wizard” of the software company, which raked in more than $500mn from investors on its promise to use artificial intelligence to revolutionise app development, also borrowed against his stake in Builder.ai, according to multiple people familiar with the matter.
Duggal’s investment firm, SD Squared Ventures, made in excess of $20mn from selling shares in the business, those familiar with the matter said, in transactions that began just before Builder.ai first received venture capital funding nearly seven years ago.
Most of the share sales were concluded before 2023, when the company raised $250mn in a blockbuster funding round led by the Qatar Investment Authority, which secured Builder.ai a valuation of more than $1bn and made it into a rare UK tech “unicorn”.
The London-based start-up had also attracted backing of leading investors including New York-based Insight Partners and SoftBank’s AI-focused DeepCore unit.
Builder.ai filed for US bankruptcy protection earlier this month after an internal investigation found evidence of potentially bogus sales and the company revised down revenues to just a quarter of prior estimates.
US bankruptcy filings also show that SD Squared Ventures was still the company’s largest shareholder at the time of its collapse, with a more than 15 per cent stake.
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Hong Kong-based investment firm Ion Pacific also provided Duggal with funds secured against his shares through a so-called “structured transaction”, which has similar characteristics to debt, according to the people.
Ion Pacific had also bought $6mn in shares in Builder.ai from other investors in late 2022, according to PitchBook.
Ion Pacific describes itself as a “special-situation” investor in venture capital. The firm’s website states that it offers “personal liquidity solutions backed by an equity stake in the company” to tech founders.
Michael Joseph, co-chief executive of Ion Pacific, said his firm’s funds “never had more than $10mn in exposure” to Builder.ai and had reduced this “significantly” before the company collapsed.
The Financial Times reported last month that Duggal had sounded out investors on a potential deal to buy back the company he founded out of insolvency, in a deal that would require less than $10mn in initial funding.
There is no suggestion that Duggal broke any rules by selling his shares or borrowing against them. Duggal declined to comment.
Earlier this month the FT reported the multiple ways in which the company, under Duggal’s tenure as chief executive, was suspected of inflating revenues. Alleged practices that have come under scrutiny include improperly booked discounts and seemingly circular transactions with key customers.
Duggal’s lawyers said there were “serious inaccuracies” in the allegations around revenue inflation the FT had requested comment on.
In the weeks before the company unravelled, the US Attorney’s Office for the Southern District of New York also requested that Builder.ai hand over documents relating to its financial reporting, accounting practices and customer relationships.