Before I started my company, I remember being constantly bombarded by messaging like “This startup just raised $100 million,” “That company hit a $1 billion valuation,” and “Look how many employees they’ve added.”
Honestly, none of those things impressed me. Why? Because raising money is not success. Hiring too many people too quickly is not success. Inflating a valuation to look big on paper is not success. Yet these are the numbers we’ve been trained to celebrate.
To me, that’s backwards.
The best businesses don’t need outside capital. They don’t need bloated teams. They prove their worth by serving customers, generating real revenue, paying their employees well, and scaling smartly. A great company doesn’t survive on hype; it survives because it builds something customers actually want to pay for.
And when companies forget that, you get cautionary tales like Builder.ai.
The hype machine versus real business
Builder.ai marketed itself as an AI-powered platform that could build custom apps in record time. Its “Natasha” AI assistant was praised as a breakthrough. Investors poured in over $450 million.
But here’s the truth: There was no AI magic behind the curtain. Most of the work was being done by hundreds of human engineers in India. Builder.ai wasn’t really an AI company; it was a software outsourcing shop wrapped in a shiny story.
What Builder.ai did is what’s known as “AI washing,” faking or exaggerating AI capabilities to catch the hype wave. And it worked for a while. The headlines were flashy. Microsoft and the Qatar Investment Authority backed them. But behind the curtain, customers faced missed deadlines, unfinished codebases, and broken promises.
Eventually, the bottom fell out. Lenders seized millions, lawsuits piled up, and Builder.ai filed for bankruptcy protection in multiple countries. Thousands of customers were left with incomplete projects, and investors were left holding the bag.
The company didn’t fail because its core service was useless. Customers want fast and affordable app development. Builder.ai failed because it lied about how it delivered that service. Hype got prioritized over honesty. Optics got prioritized over value. And that’s the fatal mistake you need to avoid.
Why chasing vanity metrics is a trap
So many founders measure success by the wrong scoreboard:
Rounds raised: Raising money doesn’t mean you’re winning. It means you convinced someone to fund your experiment.
Valuation: Valuations are just numbers on paper. They don’t pay salaries, they don’t retain customers, and they don’t foster loyalty.
Headcount: Hiring 1,000 people might look impressive, but if revenue per employee is $100, that’s a disaster. Compare that to a company where revenue per employee is $150,000; now that’s real strength.
However, because the ecosystem celebrates these vanity milestones, founders feel pressured to play along. They think if they’re not bragging about their round size or their AI story, no one will take them seriously.
I’ll admit it, I felt that pressure too.
When I took what became Howdy.com through Y Combinator, data science and machine learning (ML) were all the rage. We had an ML algorithm that helped match developers with companies. It was solid, but it wasn’t the center of our business. Still, I thought, “If I don’t pitch this as machine learning, no one will invest.”
Our YC partner stopped me in my tracks. He asked, “Are you an ML company? Is that what you’re offering?” I said it was a part of what we did, but not what we were. He said, “Then don’t say that. Just tell people what you do.”
It was so simple, it felt almost wrong. I began pitching what we did, not how we did it—in plain terms—and it worked. Ninety-three investors wanted to talk. We raised quickly, not because of hype, but because people understood the real value.
That experience grounded me. It reminded me that clarity beats complexity, and honesty beats optics.
What founders should celebrate instead
If fundraising rounds and inflated valuations aren’t worth celebrating, then what is?
Founders should examine the aspects that reflect the health of a business. Paid users are one of the clearest signs of success—not free signups, not downloads, not pilot programs, but actual customers paying real money. Revenue is another. Not “gross bookings” or other fuzzy numbers, but real cash in the door. Profitability matters too; the ability to support yourself without raising more capital is the truest form of resilience.
I also study revenue per employee. Efficiency matters, and the more value each team member generates, the healthier the business will be. Finally, I value steady growth. The overnight 1,000% jumps might look sexy, but slow, steady growth is usually far more sustainable—and much less likely to implode.
These are my markers of long-term health. Hype is fleeting, but real value endures.
The object lesson of Builder.ai
What bothers me most about the Builder.ai collapse is that they didn’t need to lie. If they had just said, “We can build your app quickly, using an efficient team of developers,” customers would still have been impressed. There was demand for that.
But they couldn’t resist the hype. They thought they had to be an “AI company” to win. And in chasing that illusion, they crossed the line from exaggeration into fraud. It’s a lesson every founder should take to heart: Don’t let the pressure to look successful push you into misrepresenting what you do.
Be successful, don’t just look successful
Looking successful is about appearances: funding announcements, follower counts, flashy offices, and headcount growth. Being successful is about substance: solving real problems, generating revenue, building trust, and growing steadily.
Builder.ai looked successful, until it wasn’t. Don’t make that mistake. As founders, our job is not to trick investors, dazzle the press, or chase the illusion of scale. Our job is to build businesses that work.
So the next time you see a startup touting its massive round or sky-high valuation, don’t be too impressed. There’s a good chance that the business won’t last.
This article originally appeared on FastCompany.com