Docs and sources: Builder.ai faked business with Bengaluru-based VerSe, which runs the Dailyhunt news app, by “round-tripping” sales worth ~$60M from 2021-2024
www.bloomberg.com/news/article... X: Nikhil Patwardhan / @patwardhannn : 🚨🚨 The Dailyhunt, Josh story seems to be unravelling quickly. Another Peak XV startup, among the most funded ones, seems to be having major governance and compliance issues. A quick thread on a series of events. Nikhil Patwardhan / @patwardhannn : A few weeks later VerSe formally filed its results with the MCA. And that report opened a can of worms A quick look at the red flags raised by Deloitte. Although the auditor signed off on the company's financials, it issued an adverse opinion on the company's internal controls. [image] Michael Jackson / @workmj : They faked it till they didn't make it. https://www.bloomberg.com/... Nikhil Patwardhan / @patwardhannn : In March, @thecaptableco reported that Deloitte, VerSe Innovation's auditor, delayed signing off on the company's FY24 annual report, as it raised certain red flags. Nikhil Patwardhan / @patwardhannn : But just a week after, Dailyhunt put out a media release saying Deloitte has given the company a clean chit and it is expecting a 75% growth in FY25. In the release, Dailyhunt also said that its revenue declined in FY24 and attributed the decline to “a slowdown in the ad market” Nikhil Patwardhan / @patwardhannn : 🚨🚨 https://builder.ai/, which filed for bankruptcy this month, was working with Dailyhunt and Josh parent VerSe Innovation to round tip revenue worth $60 million, Bloomberg reports. [image] Steven Tey / @steventey : no. freaking. way. someone actually did this IRL 😆 [image] LinkedIn: Taylor Hoekstra : In the earliest days of Popfly (>2 years ago), I strongly considered using builder.ai to get my mvp out the door... … Greg Kovacic : Another edition of “Do” Diligence: The not-so-curious case of round-tripping — “Round-tripping” involves Company #1 paying Company #2 for their products/services. … Mark Bergen : Wild new twist in this saga - now involves two unicorn startups that have raised money from Microsoft, Google, Goldman, Insight Partners, QIA, etc. #ai #startups #reporting Bismah Malik : One of the biggest startup frauds allegedly involving round tipping of revenues , sales inflation between Builder.AI and VerSe Innovation for last 4 years … Yazhou Sun : Scoop: Builder.ai routinely faked business with Indian startup VerSe Innovation to falsely inflate its revenue, sources tell Bloomberg. …
Context & Ripple Effects
The reported transactions add a mechanism to Builder.ai’s earlier revenue collapse: the company had already cut its stated 2024 revenue estimate from $220M to about $55M and restated 2023 sales from $180M to roughly $45M. The alleged $60M of reciprocal sales makes revenue recognition, rather than only execution, central to the company’s unraveling.
For VerSe, the reporting lands alongside Deloitte’s adverse opinion on internal controls in its MCA filing, despite the auditor signing off on the financial statements. That distinction puts the company’s public characterization of its FY24 audit under sharper scrutiny.
First-order effects
- Builder.ai’s reported sales history faces further challenge, with the alleged round-tripping providing a concrete basis for investors, counterparties and administrators to re-examine revenue that informed its prior scale claims.
- VerSe/Dailyhunt must address whether the alleged transactions and the auditor’s internal-control concerns were adequately governed and communicated.
Second-order effects
- Investors and auditors evaluating AI-application and low-code companies are likely to place more weight on customer cash flows, counterparty relationships and revenue quality—not merely reported bookings or headline growth.
- The episode raises the diligence burden for companies transacting with closely connected commercial counterparties, particularly where reciprocal purchases can make reported demand look stronger than underlying end-customer activity.
Third-order effects
- If similar cases continue to surface, the AI startup market may shift toward financing and valuation standards that privilege independently verifiable revenue over fast-growing reported sales.
- The broader consequence could be a sharper separation between firms with durable customer adoption and those whose growth depends on circular or weakly controlled commercial arrangements; the evidence here is limited to the named companies.
The trend: This is one data point in a broader push to test whether AI-era startup revenue reflects independent demand or financially engineered growth.