If DDD had come into play

Digital due diligence (DDD) integrates the digital dimension into the conventional due diligence framework. It focuses on assessing a company's digital capabilities and vulnerabilities both pre- and post-investment. By identifying potential issues early, DDD can help mitigate risks and minimise potential losses. In the case of Builder.ai, two key components of DDD are particularly relevant: Technology Due Diligence and Marketing Due Diligence.

1.  Technology Due Diligence evaluates a company’s software, hardware, and overall digital maturity, focusing on scalability, risk exposure, and growth potential. It involves a structured, data-driven approach covering IT strategy, infrastructure, digital capabilities, data management, cybersecurity, and financial efficiency.

• Pre-investment Benefits: includes identifying hidden liabilities (such as inefficiencies, compliance risks, security vulnerabilities), uncovering scalability barriers, evaluating operational costs, quantifying innovation potential, mitigating integration risks, and validating strategic fit.‍
• Post-investment Impact: focuses on driving digital transformation, maximising ROI, strengthening competitive edge, ensuring technology resilience, and improving decision-making.

Early detection of technical or operational issues could have enabled timely corrective measures for Builder.ai, preventing the escalation of financial problems. Technology Due Diligence provides negotiation strength by providing data-backed insights, highlighting scalable investments, and offering a clear blueprint for post-investment management.

Builder.ai’s core value proposition was its AI-driven platform. However, the AI-focused branding created the impression of a tech-driven, high-margin business. In reality, much of the development relied on outsourcing to human developers, contradicting the company’s positioning as a low-code, AI-first platform.

Without a clear understanding of the company’s AI maturity, investors risk overvaluing businesses that may be engaging in “AI washing”, meaning the exaggeration of AI to boost their market appeal. Conducting Digital Due Diligence helps mitigate this risk by quantifying AI readiness, objectively assessing the level of AI maturity. It helps develop a roadmap for AI implementation and provides a clear vision of the investment required to build the necessary data infrastructure, offering a grounded view of the company's AI potential.

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2. Marketing Due Diligence examines a company’s market position, brand strength, and marketing performance, assessing the brand’s digital footprint. This methodology helps uncover potential risks and inconsistencies, such as discrepancies between search trends, website traffic, and revenue figures. By benchmarking these indicators against competitors, conflicts and red flags can often be identified, even without the need for a deep financial audit.

While the promise of exponential growth can blind even seasoned investors, DDD offers a data-driven lens to assess a company’s actual market traction and digital performance. Real-time digital transparency through digital popularity scores, customer analytics, and user behaviour metrics ensures the company’s narrative aligns with reality. In Builder AI's case, this approach would have revealed inconsistencies between revenue figures and key digital performance indicators, such as user engagement, number of visitors, churn velocity, and customer acquisition costs.

Beyond growth metrics, a company's competitive standing becomes visible through the understanding of market trends, customer journeys, and retention patterns. DDD helps evaluate product-market fit and exposes gaps between technological claims and actual market traction, providing investors with a clearer, more objective view of a company’s growth potential.