Damn, what a shame. They had high ambitions aboutr disrupting the AEC business with Softbank money and tech fabrication know-how and seemed to be on an acquisition spree, building factories and buying up design firms and contractors. There were some news of growing pains, mostly centering on the difficulties of applying precision manufacturing to the building construction on an industrial scale (Semiconductors are built entirely in sterile factories but even prefabs still need on-site work)
Bench
Jun 4, 21 7:41 am
Don't think its just a rumor at this point ...
I'm immediately skeptical of any person/entity who uses the term "disrupt" to describe themselves or their work. Beyond that, however, I also thought this was a great idea for a company, and I'm both surprised/disappointed that they are going under. Considering that there are multiple other similar companies in other parts of the world doing this type of work as well, I really want a better explanation for why Katerra specifically was the one that couldnt make it work - it seemed like they had all of the advantages going their way?
monosierra
Jun 4, 21 8:33 am
Yeah, it might be a case of them hitting troubled waters before they could reap the benefits of industrialized production on a national (or international, given their Indian presence) scale: All the overhead of running a big company without a steady cash inflow. Their revenue seems still heavily reliant on individual projects rather than something more steady/less capricious, like what their semiconductor founders are accustomed to - I know other AEC giants also rely on contracts but architectural contracts are much smaller than infrastructural ones. They had a deal with the development company of a co-founder that was supposed to guarantee a steady supply of work to keep the factories busy but that may have fallen through.
lower.case.yao
Jun 4, 21 10:24 am
I’m both intrigued and a little suspicious when I hear about tech companies coming into the construction field and acting like they know what the next trend in building construction will be. Not everything can scale afterall.
natematt
Jun 4, 21 12:14 pm
This was always my skepticism of them. If they had been a construction company that ate up a bunch of tech companies I think it might have worked. Their explanations for their trouble and failure seems to reflect this, a lack of ability to operate within the construction space.
monosierra
Jun 4, 21 1:13 pm
What's really disappointing for me is that they seemed pretty grounded initially, opting to do multifamilies in suburbia, buying existing GCs and design firms ... to the extent that they looked more like a regular GC just with Softbank's backing. The whole Spokane plant - even that wasn't too crazy (Remember Google talking about using robots to build its BIG-designed HQ?). I guess the economics of the AEC business is just too different from semiconductors. A couple of halted projects and the whole factory grinds to a halt.
Miles Jaffe
Jun 4, 21 12:51 pm
When you sell an idea for billions it doesn't really matter if it works or not because you've already cashed in. If you can make it work there might be more money but that involves actual work and requires much more than just hubris.
narmer
Jun 4, 21 1:48 pm
Katerra should have purchased Gensler with SoftBank money and then used the Gensler organization to push the prefab building product into all of their design projects worldwide. The Katerra sales organization was way too small to be effective in a market where there are literally thousands of architecture firms and design/build contractors vying for projects.
archanonymous
Jun 4, 21 4:29 pm
I don't think Gensler was for sale.
tduds
Jun 4, 21 4:43 pm
Katerra had a lot of problems but "thinking too small" was not one of them.
narmer
Jun 4, 21 4:43 pm
My point is that they needed to make a massive purchase of the biggest design firm possible to get the prefab system in front of clients. Gensler or a similar biggie has lots of clients and accumulated credibility that Katerra didn't have and would have taken too long to build up organically.
client A: we're looking for a 200m office tower. client B: we need a new design for our headquarters office interior. Katerra-Gensler: no, what you want is a prefab wooden structure, sign the contract and let's start! it's hard to see how this makes any sense at all.
tduds
Jun 4, 21 3:43 pm
VC Money is like rocket fuel. If you put it in a car, it's going to explode.
rcz1001
Jun 4, 21 3:56 pm
The assets are going to get gobbled up by multiple parties and sometimes resold again and again. Explode sounds like a good analogy here, tduds.
They were very ambitious indeed, which in of itself is a bit suspicious. Too many players in the construction industry to be able to monopolize it to the degree they needed too to be profitable. Lots of small players doing similar work but at a small scale. It's great if all we did was rubber stamp design and continue to build the same thing over and over......and you could build some level of efficiency into the process but the construction industry is inherently not efficient. Remember Levittown, that utopia failed just like so many others.
https://therealdeal.com/2021/0...
Damn, what a shame. They had high ambitions aboutr disrupting the AEC business with Softbank money and tech fabrication know-how and seemed to be on an acquisition spree, building factories and buying up design firms and contractors. There were some news of growing pains, mostly centering on the difficulties of applying precision manufacturing to the building construction on an industrial scale (Semiconductors are built entirely in sterile factories but even prefabs still need on-site work)
Don't think its just a rumor at this point ...
I'm immediately skeptical of any person/entity who uses the term "disrupt" to describe themselves or their work. Beyond that, however, I also thought this was a great idea for a company, and I'm both surprised/disappointed that they are going under. Considering that there are multiple other similar companies in other parts of the world doing this type of work as well, I really want a better explanation for why Katerra specifically was the one that couldnt make it work - it seemed like they had all of the advantages going their way?
Yeah, it might be a case of them hitting troubled waters before they could reap the benefits of industrialized production on a national (or international, given their Indian presence) scale: All the overhead of running a big company without a steady cash inflow. Their revenue seems still heavily reliant on individual projects rather than something more steady/less capricious, like what their semiconductor founders are accustomed to - I know other AEC giants also rely on contracts but architectural contracts are much smaller than infrastructural ones. They had a deal with the development company of a co-founder that was supposed to guarantee a steady supply of work to keep the factories busy but that may have fallen through.
I’m both intrigued and a little suspicious when I hear about tech companies coming into the construction field and acting like they know what the next trend in building construction will be. Not everything can scale afterall.
This was always my skepticism of them. If they had been a construction company that ate up a bunch of tech companies I think it might have worked. Their explanations for their trouble and failure seems to reflect this, a lack of ability to operate within the construction space.
What's really disappointing for me is that they seemed pretty grounded initially, opting to do multifamilies in suburbia, buying existing GCs and design firms ... to the extent that they looked more like a regular GC just with Softbank's backing. The whole Spokane plant - even that wasn't too crazy (Remember Google talking about using robots to build its BIG-designed HQ?). I guess the economics of the AEC business is just too different from semiconductors. A couple of halted projects and the whole factory grinds to a halt.
When you sell an idea for billions it doesn't really matter if it works or not because you've already cashed in. If you can make it work there might be more money but that involves actual work and requires much more than just hubris.
Katerra should have purchased Gensler with SoftBank money and then used the Gensler organization to push the prefab building product into all of their design projects worldwide. The Katerra sales organization was way too small to be effective in a market where there are literally thousands of architecture firms and design/build contractors vying for projects.
I don't think Gensler was for sale.
Katerra had a lot of problems but "thinking too small" was not one of them.
My point is that they needed to make a massive purchase of the biggest design firm possible to get the prefab system in front of clients. Gensler or a similar biggie has lots of clients and accumulated credibility that Katerra didn't have and would have taken too long to build up organically.
Not enough credibility for narmer with Michael Green, Ted Flato, Joe Greco, and Andrea Leers as the design consortium. Not to mention Craig Curtis who left Miller Hull as a Design Partner to launch Katerra's design division and become their Design Director/Chief Architect. Bunch of nobodies ::rolls eyes::
client A: we're looking for a 200m office tower. client B: we need a new design for our headquarters office interior. Katerra-Gensler: no, what you want is a prefab wooden structure, sign the contract and let's start! it's hard to see how this makes any sense at all.
VC Money is like rocket fuel. If you put it in a car, it's going to explode.
The assets are going to get gobbled up by multiple parties and sometimes resold again and again. Explode sounds like a good analogy here, tduds.
From 2018, this article basically predicted exactly what happened: https://www.treehugger.com/wil...
good link. love this quote - H.L. Mencken once said, “For every complex problem, there is an answer that is clear, simple, and wrong.”
From Archinect's news earlier this week:
Ambitious construction startup, Katerra, finally folds after a challenging run
They were very ambitious indeed, which in of itself is a bit suspicious. Too many players in the construction industry to be able to monopolize it to the degree they needed too to be profitable. Lots of small players doing similar work but at a small scale. It's great if all we did was rubber stamp design and continue to build the same thing over and over......and you could build some level of efficiency into the process but the construction industry is inherently not efficient. Remember Levittown, that utopia failed just like so many others.
SoftBank losing money in AEC/RE?? Shocker....
who?