SoftBank-Backed Construction Startup Katerra Files For Chapter 11
UPDATE, JUNE 7, 11:30 A.M. ET: This story has been updated after Katerra filed for Chapter 11 bankruptcy protection Sunday.
Despite backing from SoftBank Group and its prodigious Vision Fund, off-site construction startup Katerra is shutting down, according to technology news site The Information, citing people familiar with the matter.
The decision to shut down the company, which was co-founded in 2015 by Michael Marks, Fritz Wolff and Jim Davidson, comes about five months after a $200M infusion from SoftBank to keep Katerra afloat. The investment reportedly kept the construction company from bankruptcy and made the Japanese investor the majority owner of Katerra.
Katerra higher-ups informed employees Tuesday of plans to shut down, and one executive told employees the company didn’t have the funds to pay out severance or unused paid time off, The Information reports. The company could walk away from dozens of projects it had agreed to help build. Katerra and SoftBank representatives didn’t immediately respond to Bisnow's requests for comment on this story.
Katerra announced Sunday that it filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Southern District of Texas after a "rapid deterioration" in its financial position. The firm said it has obtained $35M in debtor-in-possession financing and notified key shareholders that many of its U.S. projects will be demobilizing.
Katerra raised more than $2B on the promise that it could reduce the cost of building apartments with prefabrication. In 2018, after an $865M Series D funding round led by SoftBank, Katerra reached a $3B valuation.
Katerra then embarked on something of an acquisition spree, merging with New Jersey-based Fields Construction in 2018 before buying traditional construction firms UEB Builders and Fortune-Johnson General Contractors in 2019.
It wasn’t long before trouble hit Katerra, which had stopped work on at least six projects in 2019 by November. A round of layoffs followed in the spring and fall of 2020. Paal Kibsgaard stepped into the CEO role around that time, as Marks left the company for a position at venture capital firm WRVI Capital and SoftBank proffered another $200M.
Kibsgaard stepped down last month, and the company’s leadership consists of representatives from turnaround management firm Alvarez & Marsal, according to The Information.
Katerra disclosed when it filed for bankruptcy that it had entered into agreements to sell the Renovations and Lord Aeck Sargent architecture business lines to private buyers, pending court approval.
Katerra joins Greensill Capital as the second SoftBank-backed venture to shut down this year, with SoftBank CEO Masayoshi Son reportedly calling Greensill, Katerra and embattled coworking giant WeWork "investment failures."