In the past five years, a mixed picture of SoftBank-funded construction-tech firm Katerra has emerged. A thread: (1/21) 💵🏗
therealdeal.com/2019/12/16/sof…
therealdeal.com/2019/12/16/sof…
The $4B firm has struggled to complete some projects, has a corporate structure that raises potential conflict of interest concerns, and has had hiccups in its roll out of tech-based #construction. (2/21)
.@KatieBrenzel and @DavidJeans2 discovered a questionable series of relationships among executives. (3/21)
In forming the firm in 2015, CEO Michael Marks tapped his #SiliconValley network to launch a web of companies that propped up Katerra, some serving as its investors, others as customers, or sometimes both. (4/21)
Co-founder Fritz Wolff owns a private equity firm whose massive construction company was Katerra's sole customer in its early years. It provided Katerra with more than a dozen projects. (5/21)
Wolff quietly exited the company last month. (6/21) 🏃♂️
Another co-founder, James Davidson, launched a separate firm with Marks and Wolff, called Paxion Capital, which they used to invest in other Katerra-linked companies. (7/21)
One of those companies is a candy store retailer, Lolli & Pops, which filed for bankruptcy in August. It listed Katerra as one of its creditors, with $2.9M owed for renovation work. (8/21) 🍬
Then there's Kandle, an investment fund founded by the trio of Katerra co-founders. It allows them to take an equity position in Katerra projects. (9/21)
There's little known about how much it's raised, but internal documents seen by TRD show that Katerra forecasted that the fund's capital could nearly double Katerra's development starts to $2.1 billion by 2022. (10/21) 💵💵
As for the tech/logistics, there have been some growing pains. You might have heard it just closed its factory in #Pheonix 🔥. (11/21)
Sources told TRD that at its first project in Washington, wall panels made of timber arrived at the job site unusable. 🙅♂️ Why? The timber was sourced from Washington (cold, wet) and trucked to Phoenix (hot and dry) and became warped. (12/21)
Other issues, sources said, have been cost overruns. Former employees said Katerra applied a discount to prove it could deliver projects cheaper than conventional construction companies. (13/21)🚜
At one project, Katerra's estimators priced the job at $90 million. It ended up being about $140 million. (14/21)
Our reporting found that at least a dozen projects from January 2019 are dead or halted. 🚫At the same time, the firm has been tapped to build 4,101 homes in Saudi Arabia. (15/21)
It will need to build 10 to 15 homes a day by Q2 2020. To date, Katerra would only cite one project that was completed on time and on budget. (16/21) 🏘🏘🏘
Katerra has grown at an incredible rate since 2015. “While we have realigned resources in our company this year, overall Katerra has grown,” a Katerra spokesperson told TRD. (17/21)
They claim to have 300+ projects in the pipeline, have raised over $2 billion, and have a new state-of-the-art factory slated to open soon in California. (18/21)🏭🏭🏭
Our story also gets into its current valuation, the most recent funding round, and future business in the US, India and Saudi Arabia. (19/21)
For more background, check out @KatieBrenzel's report last month on Katerra therealdeal.com/issues_article… Also, kudos to @CoreyWeinberg of @theinformation, who has done a lot of excellent reporting on Katerra. 🗞(20/21)
Make sure to follow @DavidJeans2 👖and @KatieBrenzel ✏️! (21/21)
