Y-Combinator-Backed CodeParrot Shuts Down

SUMMARY

The Y-Combinator backed startup failed to sustain business due to excessive burn as well as a lack of further investment interest from VCs

Founded in 2022 by Vedant Agarwala and Royal Jain, CodeParrot was a developer focussed design to code tool which was using AI to convert components from Figma files or screenshots to production-ready code

With this, CodeParrot has become the second AI-focussed SaaS startup to shut shop in recent weeks after subtl.ai

“Startups are brutally hard,” AI startup CodeParrot’s cofounder and CTO Vedant Agarwala said in a post on LinkedIn while announcing the decision to shut the startup. The Y-Combinator backed startup, which was cofounded by Agarwala with Royal Jain (CEO) in 2022, failed to sustain business due to excessive burn as well as a lack of further investment interest from VCs.

“We didn’t raise on Demo Day. We spent the next year stuck in pivot hell, searching for what our company really wanted to be. We hired and, painfully, had to let go of both the engineers. We burned through the $500k we’d raised — and when we hit $1,500 MRR with our final pivot (Figma-to-code using LLMs), we couldn’t break through,” the CTO said.

Initially, the startup’s core offering revolved around automating complex and time-consuming routine tasks for developers to minimise human errors. It captured API (application programming interface) calls from the production environment (including requests made to the backend service) and downstream calls to databases, third-party APIs and other dependencies.

The startup’s website, which is still live, claims that CodeParrot is the only UI generation platform which could understand developers’ codebase to build new pages in minutes using their existing components and coding standards. The site also claims that engineers from companies like Udaan, Freshworks, Capgemini, Infosys, among others, use its platform.

The startup operated the platform in its beta version for about one year since inception and had plans of introducing an “open-source project” by 2024.

However, what was being advertised didn’t pan out. After multiple pivots in their run time, the founders decided to wind up the startup.

“Good prompts get you 90% there, but good evals are what really matter. And even when you’re building with cutting-edge AI, 70-80% of the codebase is still good old-fashioned software — and it deserves just as much attention,” the founder’s post added.

With this, CodeParrot has become the second AI-focussed SaaS startup to shut shop in recent weeks. Last week, subtl.ai also wound up operations due to lack of capital.

However, it is pertinent to note that VC firms continue to be bullish towards investments in Indian AI startups. As per a survey conducted under Inc42’s ‘Indian Tech Startup Funding Report H1 2025’, nearly 57% of the 80+ respondents are actively scouting for early stage AI investments, while another 22% are eyeing growth-stage bets in either AI or advanced hardware and technology.

Earlier this week, AI startups like Fractal Analytics, QpiAI, among others, raised fresh capital.