5 ms·

Katerra wanted to transform construction. It burnt $2B and shut down

43 points by bluemoon2010 5y ago

hindsightbias 5y ago
Another “revolutionary” construction company to add to the ash heap of failures.
- ceejayoz 5y ago
  "This blue-collar profession turns out to be way more complicated than we expected" seems to be a common theme.
  - kcplate 5y ago
    “How hard could it be?”
  - daniel-cussen 5y ago
    Computers solve a lot of problems, as long as those problems are digital by nature. So naturally taking over an amateur mathematician who made his living as a computor, that was an obvious one. And we've gone through a cultural transition to solving all our problems digitally: using the internet to get all of our information, listening to digital music that is in a way a nostalgia of what the real sound was like, even trying to get machines to do 100% of our driving. Blue collar? No, it doesn't work digitally, a huge amount of a blue collar worker's knowledge is not in his skull, but in his hands. Computers are remarkably bad at solving analog problems, just witness how terrible online dating is, it sucks. Or online classes, a totally inferior substitute.
- pkaye 5y ago
  Another Soft Bank investment so that was pretty certain.
- bluemoon2010 5y ago
  This doesn't necessarily mean that every company that will try to transform the construction industry will fail. Vertical integration definitely makes sense to eliminate inefficiencies. Perhaps, a new company could better execute vertical mergers and acquisitions and succeed.
renewiltord 5y ago
What went wrong? It doesn't say.
- catillac 5y ago
  Looks like it’s the first part of a multi part series
  - sokoloff 5y ago
    I read that as the first of a multi-part series of SoftBank investment failures, not a multi-part of this specific one.
- bluemoon2010 5y ago
  The company made big promises and had to burn through the funding to try to meet them without succeeding.
- deleted 5y ago
  [deleted]
catillac 5y ago
This is really interesting, I’d love to read more. One thing that’s interesting to me is that when I search HN for Katerra, I see plenty of articles posted that verify the OP story, but none of them have any comments. I guess it’s not really a tech company so even with huge valuations and bailouts it didn’t really attract interest in discussion at HN. My company is similar. One of the fastest companies to “Unicorn” status ever with rounds led by top firms, but garners nearly zero discussion on HN.
- tommysydney 5y ago
  Could you tell what's your company? I don't believe in hype and so keen on great companies flying under the radar.
boboche 5y ago
Krattera.
brendanashworth 5y ago
The best article I've read about Katerra is still from Construction Physics, it goes into much more technical detail. [1] [1] https://constructionphysics.substack.com/p/another-day-in-katerradise https://constructionphysics.substack.com/p/another-day-in-ka...
- throwawaysea 5y ago
  Thanks. This is a much more interesting read. It doesn’t seem like an obviously bad idea. Perhaps some amount of being too ambitious, some amount of bad luck (WeWork, Greensil), some amount of mismanagement (slow execution, acquisition issues) - but nothing that says the idea was fundamentally bad.
ErikVandeWater 5y ago
Reading about Katerra here and elsewhere brought me to a naïve question not easily answered by Google: How often are building blueprints re-used? E.g. I have a company and we need to expand and want our own building. Do we really need to hire an architect to design something new? Surely someone has already designed a building in the last 5 years that would suit our purpose. Just buy those blueprints and make it again (with some slight adjustment for local codes, geography, etc.). Perhaps this is done frequently and simply not very noticeable? (I understand the same blueprints may be reused for multiple buildings in one complex, and more often in the public sector).
- skybrian 5y ago
  There are house plans you can buy, but I think they require a pretty flat site? It probably works better on a larger lot too.
- RileyJames 5y ago
  I wonder what licence or ownership the building owner has over the architectural drawings & blue prints. I imagine it wouldn’t be in an architects interest to have the plans sold multiple times. Tho on the flip side, it’s unlikely the plans would be used without changes, minor or major, which are likely best made by the original architectural firm. Which could become a source of additional business.
  - andreareina 5y ago
    It's common for the architect to stipulate in the contract that the plans are for the specific project (down to the location) and cannot be used for any other project.
- genocidicbunny 5y ago
  From what I've read/heard, reusing blueprints to a house is one of the more economical ways of building a new house. You start with a pre-made blueprint that has the necessary approvals, and do modifications to it as you please. Usually this should result in less bureaucracy to get the house built than designing from scratch.
aaron695 5y ago
The construction industry is being revolutionised quickly. "Almost every advancement in construction is small enough for a man to carry" - https://austinvernon.site/blog/construction.html https://austinvernon.site/blog/construction.html So if Katerra wanted revolutionary construction that jumps even quicker than this ongoing well documented advancement, Elon Musk style from the ground up, they need a reason why their product would work contrary to what anyone can see. They never gave one, so I don't see why it would have worked. Prefab needs a prefab factory in every city. And think of how limiting in design that would be. Kick ass screws need one factory in the world. And the fact people get militant about things like Square-Drive screws means screws will continue to be pushed evolutionarily. Who knows if the Phillips head can be upended but we are at a time in history that we can find out.
gmays 5y ago
A better, more detailed writeup is here: https://constructionphysics.substack.com/p/another-day-in-katerradise https://constructionphysics.substack.com/p/another-day-in-ka... I've been very interested in the Katerra story for a few reasons: - I'm a real estate investor - I have a logistics background - The founder (or some other exec, can't remember) came to speak to my MBA class a few years back, and we toured their factory What Katerra was trying to do is highly compelling, and I have to believe it'll eventually get done. In terms of how it gets done, two paths initially come to mind: 1) Amazon acquires to leverage the logistics-at-scale approach and funds long enough to find P/M fit. 2) A new startup (or spin-off) focuses on one of the products (I'd choose software first) and nails P/M fit. By strategically making the first product one that removes blockers to pave the way and jump-starts change in the rest of the industry they can expand into adjacent products. Maybe there are existing companies like Houzz that could incubate one of these projects. IMO solving this and combining it with ESG is world-changing to the extent of Tesla--affordable, sustainable housing for everyone. It could even be a status thing where the wealthy are willing to pay a bit more and for every build a home gets built for someone in need. If I were back in my 20's with no kids/mortgage and looking for a new project, I would tackle this.
- trevyn 5y ago
  I was under the impression that the “housing problem” is basically land prices anywhere near where everyone wants to be, and a zoning/regulation/NIMBY thing, not actual construction costs. Am I wrong?
  - boublepop 5y ago
    Yes, you are correct. The housing prices have been steadily climbing over the years, and that’s not because companies are getting worse and worse at building houses, and it hasn’t been because of rising material costs (the rises that currently are are all much shorter term and due to corona). Essentially every policy or local decision that could help to provide more affordable housing has also been a direct threat to the real estate investments of the politicians who have shut it down. It’s the biggest generational theft ever seen, where the older generation is deliberately denying the entering generations cheap access to zoning in order to inflate housing prices and extort as much money as humanly possible from the youth.

43 points by bluemoon2010 5y ago

hindsightbias 5y ago

Another “revolutionary” construction company to add to the ash heap of failures.

ceejayoz 5y ago
"This blue-collar profession turns out to be way more complicated than we expected" seems to be a common theme.
- kcplate 5y ago
  “How hard could it be?”
- daniel-cussen 5y ago
  Computers solve a lot of problems, as long as those problems are digital by nature. So naturally taking over an amateur mathematician who made his living as a computor, that was an obvious one. And we've gone through a cultural transition to solving all our problems digitally: using the internet to get all of our information, listening to digital music that is in a way a nostalgia of what the real sound was like, even trying to get machines to do 100% of our driving. Blue collar? No, it doesn't work digitally, a huge amount of a blue collar worker's knowledge is not in his skull, but in his hands. Computers are remarkably bad at solving analog problems, just witness how terrible online dating is, it sucks. Or online classes, a totally inferior substitute.
pkaye 5y ago
Another Soft Bank investment so that was pretty certain.
bluemoon2010 5y ago
This doesn't necessarily mean that every company that will try to transform the construction industry will fail. Vertical integration definitely makes sense to eliminate inefficiencies. Perhaps, a new company could better execute vertical mergers and acquisitions and succeed.

renewiltord 5y ago

What went wrong? It doesn't say.

catillac 5y ago
Looks like it’s the first part of a multi part series
- sokoloff 5y ago
  I read that as the first of a multi-part series of SoftBank investment failures, not a multi-part of this specific one.
bluemoon2010 5y ago
The company made big promises and had to burn through the funding to try to meet them without succeeding.
deleted 5y ago
[deleted]

catillac 5y ago

This is really interesting, I’d love to read more. One thing that’s interesting to me is that when I search HN for Katerra, I see plenty of articles posted that verify the OP story, but none of them have any comments. I guess it’s not really a tech company so even with huge valuations and bailouts it didn’t really attract interest in discussion at HN. My company is similar. One of the fastest companies to “Unicorn” status ever with rounds led by top firms, but garners nearly zero discussion on HN.

tommysydney 5y ago
Could you tell what's your company? I don't believe in hype and so keen on great companies flying under the radar.

boboche 5y ago

Krattera.

brendanashworth 5y ago

The best article I've read about Katerra is still from Construction Physics, it goes into much more technical detail. [1] [1] https://constructionphysics.substack.com/p/another-day-in-katerradise https://constructionphysics.substack.com/p/another-day-in-ka...

throwawaysea 5y ago
Thanks. This is a much more interesting read. It doesn’t seem like an obviously bad idea. Perhaps some amount of being too ambitious, some amount of bad luck (WeWork, Greensil), some amount of mismanagement (slow execution, acquisition issues) - but nothing that says the idea was fundamentally bad.

ErikVandeWater 5y ago

Reading about Katerra here and elsewhere brought me to a naïve question not easily answered by Google: How often are building blueprints re-used? E.g. I have a company and we need to expand and want our own building. Do we really need to hire an architect to design something new? Surely someone has already designed a building in the last 5 years that would suit our purpose. Just buy those blueprints and make it again (with some slight adjustment for local codes, geography, etc.). Perhaps this is done frequently and simply not very noticeable? (I understand the same blueprints may be reused for multiple buildings in one complex, and more often in the public sector).

skybrian 5y ago
There are house plans you can buy, but I think they require a pretty flat site? It probably works better on a larger lot too.
RileyJames 5y ago
I wonder what licence or ownership the building owner has over the architectural drawings & blue prints. I imagine it wouldn’t be in an architects interest to have the plans sold multiple times. Tho on the flip side, it’s unlikely the plans would be used without changes, minor or major, which are likely best made by the original architectural firm. Which could become a source of additional business.
- andreareina 5y ago
  It's common for the architect to stipulate in the contract that the plans are for the specific project (down to the location) and cannot be used for any other project.
genocidicbunny 5y ago
From what I've read/heard, reusing blueprints to a house is one of the more economical ways of building a new house. You start with a pre-made blueprint that has the necessary approvals, and do modifications to it as you please. Usually this should result in less bureaucracy to get the house built than designing from scratch.

aaron695 5y ago

The construction industry is being revolutionised quickly. "Almost every advancement in construction is small enough for a man to carry" - https://austinvernon.site/blog/construction.html https://austinvernon.site/blog/construction.html So if Katerra wanted revolutionary construction that jumps even quicker than this ongoing well documented advancement, Elon Musk style from the ground up, they need a reason why their product would work contrary to what anyone can see. They never gave one, so I don't see why it would have worked. Prefab needs a prefab factory in every city. And think of how limiting in design that would be. Kick ass screws need one factory in the world. And the fact people get militant about things like Square-Drive screws means screws will continue to be pushed evolutionarily. Who knows if the Phillips head can be upended but we are at a time in history that we can find out.

gmays 5y ago

A better, more detailed writeup is here: https://constructionphysics.substack.com/p/another-day-in-katerradise https://constructionphysics.substack.com/p/another-day-in-ka... I've been very interested in the Katerra story for a few reasons: - I'm a real estate investor - I have a logistics background - The founder (or some other exec, can't remember) came to speak to my MBA class a few years back, and we toured their factory What Katerra was trying to do is highly compelling, and I have to believe it'll eventually get done. In terms of how it gets done, two paths initially come to mind: 1) Amazon acquires to leverage the logistics-at-scale approach and funds long enough to find P/M fit. 2) A new startup (or spin-off) focuses on one of the products (I'd choose software first) and nails P/M fit. By strategically making the first product one that removes blockers to pave the way and jump-starts change in the rest of the industry they can expand into adjacent products. Maybe there are existing companies like Houzz that could incubate one of these projects. IMO solving this and combining it with ESG is world-changing to the extent of Tesla--affordable, sustainable housing for everyone. It could even be a status thing where the wealthy are willing to pay a bit more and for every build a home gets built for someone in need. If I were back in my 20's with no kids/mortgage and looking for a new project, I would tackle this.

trevyn 5y ago
I was under the impression that the “housing problem” is basically land prices anywhere near where everyone wants to be, and a zoning/regulation/NIMBY thing, not actual construction costs. Am I wrong?
- boublepop 5y ago
  Yes, you are correct. The housing prices have been steadily climbing over the years, and that’s not because companies are getting worse and worse at building houses, and it hasn’t been because of rising material costs (the rises that currently are are all much shorter term and due to corona). Essentially every policy or local decision that could help to provide more affordable housing has also been a direct threat to the real estate investments of the politicians who have shut it down. It’s the biggest generational theft ever seen, where the older generation is deliberately denying the entering generations cheap access to zoning in order to inflate housing prices and extort as much money as humanly possible from the youth.