Thousands of workers laid off. $2.2 billion up in smoke. 2nd SoftBank unicorn to collapse this year before getting to the IPO or SPAC window, after Greensill, which it helped take down.
By Wolf Richter for WOLF STREET.
“Incremental progress isn’t enough – we are pursuing transformational change on a massive scale,” says the LinkedIn profile of Katerra, a six-year-old Silicon Valley unicorn startup. “Katerra exists to help transform construction through technology – every process and every product,” it says. It had received about $2.2 billion in funding, largely from SoftBank’s Vision Fund, to disrupt the commercial construction industry “through technology,” as it says.
But it’s shutting down and will lay off the remaining employees – it once had as many as 8,500 employees before the layoffs started – and abandon numerous construction projects that it had agreed to build, according to sources cited by The Information.
The executive that informed employees on June 1 in a video call of the shutdown and layoffs told them that the company didn’t have enough cash for severance packages or unused paid time off. The executive blamed the out-of-money moment on the effects of the Pandemic and the rising costs of labor and construction materials, according to The Information.
Katerra was in the business of modular commercial construction – apartment buildings, office buildings, and other commercial buildings, with the goal of “transforming construction through innovation of process and technology,” as it still says on its website.
This type of big commercial building is where modular construction is the most promising, but with enormous pitfalls.
So it says that its “Katerra Building Platforms take the risk out of construction by applying the principles of repeatable manufacturing to entire buildings. Katerra buildings are made from manufactured assemblies and components; including wall and floor panels, casework, bathroom and kitchen kits, and more,” it says. But the risks are not at all taken out.
Michael Marks, Katerra’s co-founder and CEO was fired in May 2020. Paal Kibsgaard, former CEO of Schlumberger, and the COO of Katerra at the time, was named the new CEO. He stepped down in May 2021. And Katerra is currently being run by folks from the consulting firm Alvarez & Marsal, according to The Information.
This is the second major SoftBank backed company to collapse this year before reaching the IPO window; the first being Greensill, the supply-chain finance giant that collapsed and filed for insolvency in March. Its German bank was taken over by banking regulators, amid allegations of missing funds.
Credit Suisse, which packaged Greensill’s supply-chain-finance notes into funds that it sold to investors as low-risk money-market-style investments – including $435 million in notes by Katerra – is now having a lot of heartburn, as are the investors in the funds.
Yet, last December, months before its own collapse, Greensill was shanghaied by SoftBank into bailing out Katerra to avert a Chapter 11 bankruptcy filing. As part of the bailout, Greensill forgave Katerra $435 million in supply-chain debt in exchange for about 5% of the company’s worthless equity.
SoftBank plowed another $200 million into Katerra, after having already plowed $200 million in bailout funds into it in May that year, at the time Kibsgaard was named CEO. And that was enough to cashflow Katerra through May 2021. But that’s it.
One collapsing Vision-Fund-backed company bailing out another Vision-Fund-backed company and then both collapsing in sequence is a dubious practice, but apparently no big deal in the world of SoftBank’s unicorns.
The thing is, Katerra simply didn’t make it to the IPO window in time, and wasn’t acquired by a SPAC in time to then be dumped into the lap of retail investors. It’s one of the exceptions in SoftBank’s bailiwick.
Greensill is another exception that didn’t make it out the IPO or SPAC window. WeWork, which scuttled its IPO in 2019 and lost another $3.2 billion in 2020, is now trying to go public via merger with a SPAC to dodge the fate of becoming the third big exception in SoftBank’s bailiwick.
But the unicorns that recently went public via IPO or SPAC are burning a running ton of cash, and some don’t even have revenues to speak of. Katerra at least had a real business, real projects, and real revenues.
Katerra tried to grow by offering services, such as architecture, and by building factories in various cities that assembled components for its construction projects, and by buying other construction companies – and in that respect it was a rollup similar to Compass in the real estate brokerage sector, another SoftBank backed company that lost $1 billion over the past three years, including the loss in Q1. But Compass did make it out the IPO window on April 1, though it’s stock [COMP] has cratered, closing today at $12.93, down 41% from its intraday high on its first trading day.
Katerra co-founder and former CEO Marks, and now a VC, calls Katerra in his profile on LinkedIn “a technology company optimizing every aspect of building design, materials supply, and construction.” Turns out what the company was really very good at – like so many unicorns – was disrupting an industry by burning large amounts of cash.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
Great summary of another dying Unicorn. Article insinuates SoftBank is thriving because only a couple of its unicorns (Katerra being one) did not make it to the SPAC Finish Line.
I guess SoftBank, overall, has a solid biz model, or at least forsaw the SPAC window and prepared for it.
If only I can afford to fail up as spectacular in life as Softbank has recently with this and WeWork. Wonder what’s the perception of Masayoshi Son is like in Japan? With so much money dumping into these unicorns and sending billions into money heaven, hopefully people over there is not worshipping him as some kind of business genius cause at this point, you can probably do better with those billions by giving it to a kid and let him throw it at a dartboard.
Speculation, by its very nature, will lead to some failures. Big speculation = big failures.
However, the “business model”, like Greensill, is nothing to do with real business. It’s basically:
Find very large industry.
Promise massive shake-up and therefore profits through technology.
Chuck in lots of capital to make it look kosher. Throw money at politicians to play ball or create legal loopholes.
IPO/SPAC.
Quietly disappear with the profits before everyone clues up.
Business collapses when “massive savings” turn out not to be there.
Repeat.
Southpark had it nailed 20 years ago.
*Way* too many startups,
1) Launch with hopelessly vague, “underpants gnome” business models that are little more than (mostly empty) black boxes with a “disruptive technology” sticker slapped on the outside and
2) To compound the madness, indulge in insane burn rates that make mkt adaptation impossible.
We had a REAL “black box” guy here in Santa Rosa, CA, early 70’s.
His black box was big, I heard it was around 8ft cube size. Anyway, so you plugged it into the electrical grid for a while, and then it delivered “free electricity” forever. Guy’s name was Cusino, and I saw his fenced “lab” out in Piner industrial area with a big sign, “Bypass Engineering”. So he scheduled his first demo at the old SR Post Office, but they needed some “part” which meant a trip to some Indian Reservation out off I-5. Not sure how many times this scenario went on before someone cried “foul”, but it was discovered many prominent local doctors, lawyers, businessmen, etc, had invested a lot in it. Even the famous Rev Argue who built the Christian Life Center out on Hwy 101 which to this day is still a huge venue for famous performing names and also wedding receptions, etc, put $20K or so of church funds in it. (he had to leave on Sabbatical and never came back. Cusino didn’t either or maybe they busted him, I forgot.)
I really would have liked to meet this guy, must have been a hell of a salesman. And he did it the hard way, compared to these folks in the article.
Maybe that venue is gone now, I don’t get out much, but I saw Dana Carvey there in 2012 or so. And records are all available at the Santa Rosa Press Democrat….I know it sounds far-fetched, but it’s true.
Also the box was supposed to power the whole Post Office.
NBay-it’s gone through various monikers, functioning with a return to the ‘Luther Burbank Center’ handle currently…
may we all find a better day.
I had a cousin (by marriage) who was a big shot in the investment division of an insurance company back in the Eighties. At the annual Christmas party, I asked him if it is true that a monkey with a handful of darts and a recent Wall Street journal could outperform most fund managers. He laughed and admitted that it was true. He went on to manage a couple of well known funds and become very wealthy. I heard that he was seen buying monkey chow at Petco.
So 8500 employees get all sorts of unemployment and expanded unemployment benefits for some time to come. I feel for them, but in California it pays to not work.
This is a very strange take. Their employees were probably mostly architects, construction workers, machinists, and software and hardware engineers. That is, those professions that make quite a bit more than unemployment plus any pandemic-specific benefits.
People never question how come the CEO or higher ups always get a golden parachutes and big compensation even if they screw up the whole company. When a worker in lower level or middle level gets a $100 in unemployment compensation, the protestant work ethics and American way of hard-work would rise up.
Well said.
Well, here’s one example of how a CEO walks away with a huge golden parachute. They sign contracts before they take the helm.
In 2011, the firm I worked for hired a new CEO to “turn around the company.” He told the company board it would take about 5 years to complete the turn-around. At that point, he came in, revved up the employee base, changed the culture, and began adding new products.
Unfortunately, after 18 months, the board fired him, stating that it was taking too long to accomplish his goals. According to SEC filings, he walked away with 36 million. We (the employees) were stunned when that figure came out. But that’s how it works.
I was lucky. I was laid off in 2018 and walked away with a heck of a severance based on 27 years of service. But others weren’t so fortunate.
Actually, people (myself included) question that all the time. I’ve long said that public companies need to be regulated far more than they are.
That’s our Calvinistic form of protestantism at work. You get rich because God looks favorably on you, plus a good dose of predestination.
It’s kind of a shut up, keep praying and putting money in the box, and wait your turn kinda thing.
I was actually being somewhat tongue in cheek, but I would think mostly construction workers or assembly line workers, not white collar or college educated folks, unless this company never actually made something. It would be interesting to know what the breakdown and pay scale was at this point.
My questions are also directed to the larger media spinning about $300 unemployment benefits are causing workers to quit their job. If that was the case, then their job was not so good either. Captialist or communist, I prefer a scandinavian-nordic model of job, education, healthcare and retirement.
Don,t fell sorry for Mr greensill as reported in the AUSTRALIN news paper the Greemsill family owns $ 40,000,000 of some of the best agricultural land in Queesland Australia .
funny how all the so-called smart money is investing in “farmland” these days. i would speculate that much of this land has been stripped of most of its productive soil and will require ever increasing amounts of industrial chemicals (fertilizer) to support patented gmo seeds. because progress.
we’ll see how that works out. if the government actually cared about the common citizen, they would break out the ol’ victory garden literature posthaste.
and yeah, we’ll see how that works out.
…what the company was really very good at – like so many unicorns – was disrupting an industry by burning large amounts of cash….
That, in a word, is finance. Namely, the management of money, often in large amounts. That is finance, financial, financialize, financiialization, The execs et al make a ton of benefits before they go; they are never the bag-holders.
Where is that mentioned in any definition of capitalism?
Ex
At 2% cost of capital absolutely anything can be made to look like the wonder of the age, even Windmills in the sea.
Hit them with 7 or even 5% and you’ve got a bargain clearance sale of what used to be very expensive new assets.
Posted specially to please P C
Going off fossil fuel as much and as soon as possible has nothing to do with cost of capital. It’s an imperative if we want to survive as a species in an orderly manner…..or just let it all go Mad Max/Somalia…..no PC there, guaranteed, and no gov’t interference in personal “freedoms”, either.
Green New Industry and Conservation Program, NOW!
NB
Prior to 1750 a very small world population eeked out a meagre living with all physical things like cloth and cups and shoes, etc all very hard to come by. They had water wheels and windmills which provided meagre and unreliable power for their needs.
‘POWER’. Reliable and controllable energy came only from animal muscle which converted food into usable ‘WORK’. Horses were ok, but for skilled work you had to do it yourself or use ‘slaves’. The rich didn’t like doing it themselves, no surprise there then.
I say 1750 because around that time an English genius called Newcomen invented the first device which could routinely turn ‘thermal’ energy into useful ‘work’ ie the ability to move force over a distance. I speak of his atmospheric engine which ‘BURNT’ coal.
20 odd years later an even bigger English genius called Richard Trevithic made the first high pressure steam engine which had enough ‘power to weight’ to allow unlimited movement faster than horses could provide. Ever since that time the efficiency of thermal energy has been relentlessly improved to allow the huge population of the current world to have ‘ALL’ the things most of us currently enjoy in direct proportion to the amount of energy consumed.
To talk of reducing use of thermal energy other than by substituting atomic or fusion energy is to talk of rewinding the industrial revolution back to 1750 in terms of population and availability of goods. It is utterly disingenuous of non-engineers in the media and elsewhere to propagate the ‘myth’ that huge reductions in thermal energy use will not lead to huge reductions in population and lifestyle for those that do survive trying to breed enough horses to do all the work again.
Huge vested commercial interests will tell you it’s all painless but the Victorians learned that cost of capital, the more honest the better, was the most efficient way for civilisation to proceed to a better life overall.
For me, a bet on the forecasts of a MODEL (see what they did with Covid) that I cannot even comprehend is a far bigger gamble than I would ever be prepared to make and the names of all those who advocate this course of action should be carefully written down, so that they can be held properly culpable for any damage that their ideology causes over future years. Explain to me how one can even measure an infinite variable like the temperature of ‘the planet’ and there’s a chance I might listen to you, but don’t tell me it will be 1.7369degrees warmer in 20years, that’s a TV joke for kiddywinks.
The comment section of this blog is often a veritable forest of strange takes.
yes./that’s precisely why many of us love it here.
x
Pea-“…when the going gets weird, the weird turn pro…”
– Hunter S, Thompson
(meself, have been considered a ‘pro’ most of my life…).
may we all find a better day.
Yeah, it’s also hard for me to even imagine people needed training in thinking “outside the box”.
“often a veritable forest of strange takes.”
If people don’t ride their own favorite hobby horses…who will?
Personally…I blame the UFOs.
I blame Michael Engels, but I stole that from someone else here.
I blame Micheal Engels too. He cast a weird spell over this place.
Pea Sea
Please grace us with your “take”…
All these stories of excesses are screaming “top of bubble!”
+1
Brainard was out there yesterday explaining how the Phillips curve is working, inflation is a good thing, banks throwing money around is a good thing for jobs, whatever. In North Korea they pay people to count the blades of grass on the front lawn of the palace. The Fed should loan an investment bank the cash to start a nation wide grass counting operation. Because, we need to know how much grass is really out there. The investment bank can make it public via spac halfway through and explain to tomorrow’s “investors” how the huge cash pile makes this a “growth” stock that needs just a little more cash to create even better grass counting technology, with robots and lasers and stuff…..
A good job is a job that fills a need, that people will pay for in a competitive society. Good jobs are not created because of too much money sloshing around or too much inflation. Somewhere along the way the central planners forgot about good jobs. Who cares about what real people actually need, they say, we must provide liquidity to the venture capitalists and if you get paid to count grass or make modular homes for a couple years good for you, and you’re welcome.
Tom, I will bet that there are government grants ($$$$$$$) already provided to “researchers” to do just that….count blades of grass.
I read the news today—oh, boy
Four thousand holes in Blackburn, Lancashire
And though the holes were rather small
They had to count them all
Now they know how many holes it takes to fill the Albert Hall
A day in the Life by the Beatles
Anthony, why don’t you just SAY, “ALL government wastes money”, whereas your heroes in private industry can REALLY get things done, and deliver what we actually NEED cheaper and better.
Like, we now can talk to almost everything, refrigerators, lights, thermostats, and other home devices/appliances, and many cars, and for some maybe even their entire home, (if they have the money or credit), not merely the TV…..that’s so 2017.
Now, THAT is well spent money, correct?
I love the Trojan commercial where the girl keeps saying, “More, more, more”, and Alexa acknowledges, and keeps placing orders with Amazon.
i know, i’m actually on the optimistic side these days more often than not. i smiled when i saw this article on the heels of McNellis’ earlier one. all these bubbles pimples and pimps have hardened into boils cysts nobs and spurs that haven’t been lanced but are starting to seep.
the sooner everyone gets they heads out they asses, the sooner the disco record skips and warbles at the end, the sooner the dry ice evaporates, and sooner we dry up, go soft, and put the dishes in the dishwasher, the sooner the tinsel, glitter, and piles of discarded influencer hair extension tracts and magnetic eye lashes blow away in unison like tumbleweed, the sooner we can collectively stumble out back into the sunlight of our global crusty morning after, like Gilda Radner stumbling out in her Walk of Shame, onto a New York street in her “Hey You” parody perfume commercial for pathetic one night stands.
i thought it was a foregone conclusion it was all over because of the magic phones but Basul said during communism in Czechoslovakia, EVERYONE looked down and into their books everywhere in public. and then early in the 2000s he heard kids laughing on the streetcar in Prague and he knew that earlier era was over with a new generation.
turns out McNellis may be right after all. he’s on a run of looking good by calling out modular fantasies before this Katerra boil oozed. maybe everything will turn out okay after all, before we’re forced to go to the Chernobyl point of return.
good morning! i’m baaaaaaack….
x
Hi kitten lopez. warbles? I haven’t heard a warble since Andy Partridge teased us with Fuzzy Warbles and that was some years ago now.
I heard from a direct source last week that Andy and daughter Holly are doing fine and creative and artistic still every single day. (Andy Partridge? I’m sure Paulo and a few others here have no idea who or what I’m writing about here)
where are you? maybe some of you should do meet ups where you are, in tandem with us here in San Francisco. If you’re feeling shy still, it’s a great excuse even though we shouldn’t need ’em anymore in this new splattered era of Now Times.
i remember you– i’d looked you up awhile back. and i’m tagging you in this thread to think about starting or doing a meet up where you are because you’re a musician and would also have a vested interest an ecosystem offline, a new world of actual FUN and people willing to go outside in the world, too.
what’s in my head is someone said: “we don’t yet realize how many people agree with us because the media and innerwebs make it seem , but we soon will.”
oooh! i LIKED that… “soon will.” ooooh… sounds like FUN.
you’re the right age. don’t leave art or the future in the hands of anyone less than 50 yet. make them pry it out of our dead cold hands. whatever Charlton Heston said about guns, i feel that way about our present and future.
there./ don’t worry about him anymore; Paolo will totally get this one.
x
Good to see ya Kitten…
Still have my custom name tag you made.
aha! funny you said THAT, my dear Mr Alameda Renter!– because James and i just got back from spending the afternoon with Corky and Basul, and we were just talking about the death of the creativity in the city but i said i’ve already got plans for that, for taking life back into the Real because the pandemic shut downs and our reliance upon the innerwebs for absolutely EVERYTHING in Real Life made me wanna DIVERSIFY by trying to attract and find the entrepreneurs and doers and thinkers to have un-censored real adult complicated and complex and thus very likely INNOVATIVE IDEAS.
they said no one creative or entrepreneurial meets up casually in real life anymore. / said they can’t anyone to commit or follow through on much of anything.
i said there was already a Wolf Meet last year. i didn’t think they’d be impressed or even HAPPY. but they had NO IDEA that there had already been a Wolf Meet and Basul was so excited he got up out of his recliner and said, “you go tell Wolf that it’s time to have a new one as a celebration for the end of the shut down!”
yes, Wolf! it’s TIIIIIME!
Basul said he imagines there’ll never be a better time for us to get a space for free to do events, even. something on a monthly to attract life and good ideas. he and i think alike, but i wasn’t thinking it would be yet, but he’s RIGHT!
so Wolf… let’s plan one later this summer.
we must not forget to coordinate if Steve from Bucks County, PA is planning another motorycle trip to his friends’ here in San Jose since he blessed us on our maiden meet up.
Alameda Renter– glad you’re still in Alameda. tell your girl i said hi and that i hope to see her at the next Wolf Meet. / i’m believing in serendipity magic and synchronicity again.
i’m optimistic now that everything’s finally going tits up. life had been going on with that one note holding ominous music you get when you know the monster’s within disemboweling distance… but you can’t smell see him but you can hear the ominous horror movie chord. well, EVERYONE can hear the monster movie chord but it went on too long and that’s why i can finally laugh now.
xx (one for each of you, my Alameda Renter friend! i presume i’ll see you soon. *wink*)
I met some neighbors at the pool today. They sold their home days ago. They had seven bids. One was from the Internet, all cash, waving the home inspection contingency. The winning bid was over their asking price.
From the Census Bureau, May 18, 2021:
“Privately‐owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,760,000. This is 0.3 percent (±1.2 percent)* above the revised March rate of 1,755,000 and is 60.9 percent (±1.8 percent) above the April 2020 rate of 1,094,000. Single‐family authorizations in April were at a rate of 1,149,000; this is 3.8 percent (±1.0 percent) below the revised March figure of 1,194,000. Authorizations of units in buildings with five units or more were at a rate of 559,000 in April.”
“The thing is, Katerra simply didn’t make it to the IPO window in time, and wasn’t acquired by a SPAC in time to then be dumped into the lap of retail investors.” – This little gem cannot be overstated. It is how those in the big club raid retirement funds. And into your 401k it goes. All of this liquidity decreases the efficiency of the creation of legitimate ventures. Or is it merely the risk-off environment? Yeah, that’s the ticket, wink, wink.
I remember back in the late middle ages when I was an Econ major at CAL that one of the tenets drilled into our tiny minds was that one of the main functions of a capital-based economy was to “direct limited resources to their most efficient use.”
That has clearly been tossed out the window since the Fed started meddling with the machine in such a grand fashion for the past decade or more. One can only bend the forces of nature for so long. Just sayin’.
True capitalism died a long time ago, not least because of government regulations, which have the effect of creating cartels of a few large companies. One look at the huge difference in cost of regulation per employee between large and small companies tells you that. Looking at the various ways those large companies contribute to politicians and political parties, it sure looks like the effect is intentional.
Then add in the vast amount of licensing and regulating of professions for highly dubious benefits, or even counterproductive effects, and you have an economic system which is not capitalism.
..and don’t get me started on government pseudo-monopolies, like education.
The Fed effectively supporting zombie companies is just accelerating the decline, not the major cause.
True capitalism was an abject failure in this country.
“True capitalism was an abject failure in this country.”
The current crony capitalism is the worst thing we’ve ever had.
Sailor-hands-down best observation on the anticapitalist ‘intentional’ ‘cost of regulation per employee’ tilting the playing fields away from ‘Main Street’ businesses and firmly towards the megas. Kudos.
may we all find a better day.
I remember Accounting 1A I took in 1999 in the midst of the .com bubble… My professor got in a heated debate with the class when he would not back down that the purpose of ANY business was to make a profit…
Of course we were all pointing out the .com’s that seemed to be interested in inflating share price rather than creating actual profits from their business plan.
Wylie-“…hello, oh, my suit? Armani. What do i do? Ah, I’m in professional gambling-last night I made a profit of…”.
may we all find a better day.
As I see it, the stock bubble will have to be popped. The tax code, littered with tax cuts and tax loopholes, needs to be cleaned up. Biden will have to be successful with his programs, but the odds are long the Republicans will not support him. If he sticks to the ‘bipartisan’ bias when there is none, that falls into the ‘management failure’ folder. There’s going to be a need for a job guarantee of some type. Infrastructure investments are very important right now.
The creepy crawlies of K Street will pump millions into Congress to protect the special deals they purchased in the past.
Democrats and Republicans will both take the bribes. An honest politician is one who once bought, stays bought.
“Try. Fail. Try again. Fail better.”
– Samuel Beckett
Beckett clearly wasn’t a skydiver ;)
It’s all a giant bust out.
Marks is now a VC. So clearly he is doing well. Though probably not as well as Travis K. But well played. That’s what it’s all about I guess. Get in. Get out. Do well.
Anyone who knows construction already knew this company was BS the first time they heard about it. There are so many ways to cut corners in building with materials and workmanship, most people don’t realize it until 5-10 years later the place starts failing literally everywhere.
And no, depending on how complete the modular constructed unit is made, sheetrock, plumbing, electrical, tile work, etc etc doesn’t need to be hauled and bumped for miles down a highway then jacked around into place by cranes. You’re just asking for problems.
There’s no chance my buildings will fall down. I build them myself ;)
I spend about 3% more total on materials than the average contractor-built house. That’s partly because I have less waste as labor hours aren’t so important, but it’s surprising how little extra one needs to spend to get quality materials in the important places.
I also spend about 40% less on heating/cooling due to much better efficiencies. If you’ve ever seen contractors stuffing in insulation, this will not come as a surprise.
I noted with approval the wise words of a craftsman to his apprentice:
‘The difference between a good job and an excellent one is only another half hour of work’.
Assuming good materials as a given, of course, this is so often true.
Xabier-redux an old moto-racing saying of ours: “…why is it if you don’t have the time to do it right on the first pass, you always have the time to do it again?…”.
may we all find a better day.
This has been going on, with PROFIT, for at least 40 years.
Same with short term leasing like WeWork.
I see no new technologies “transforming” these industries except for the massive cash burn part of it.
“Katerra was in the business of modular commercial construction – apartment buildings, office buildings, and other commercial buildings, with the goal of “transforming construction through innovation of process and technology,” as it still says on its website.”
If one were not too cynical, I suppose you could apply a technique called “benefit of the doubt” and say this was a sincere nice try on the part of the Katerra leadership team, to try and make the world a better place doing cool and exciting stuff.
Back in the dotcom era (98) there was a Cambridge MA startup called PlanetAll. The guys were stoked!! The startup vision was to eventually become what Facebook became some years later – a friending service to potentially connect anyone to anyone else anywhere. Millions and millions, maybe even billions, of humans planet wide. Each head being a dollar sign.
I applied to the place as a dev/techy and they wanted me. Stake in the company was part of the offer. But I decided I just didn’t want to work all day all night in startup mode. I’m just not one cut out for that, and even in my younger days I wasn’t. Though I know that is what it takes to do well.
PlanetAll in theory really could have happened, and eventually given us a PlanetAll world, instead of a Facebook world. It didn’t. Got absorbed by Amazon. Some of the AMZN “Friends and favorites” tech came from PlanetAll. When it got sold I assume the founders came away from it having done well. The techies, maybe not so much. But burnout can be recovered from and even after the DC bust hit, strong and talented techies remained in good demand.
I had a tour of the Katerra office and first production facility about five years ago. The office had staff tripping all over each other but they had very grand plans. The production facility was low tech and the manager was pretty clear about how many problems they were having completing a small project. Nothing was fitting well when they went to but the modules together. Yet at the same time they were talking about the massive scale they planned to achieve.
That seems to be the opposite of most success stories; doing something really well and then adding scale and additional options to grow the business.
As a follow on to the discussion the other day about building types and changes in the industry that Katerra dreamed of leading, I would add that I also recently visited a company that does panelized construction. Structurally Integrated Panels (sips). I am impressed with this as an alternative and have seen the finished product. We plan to utilize for several small single tenant buildings that we are permitting now.
The most difficult part of adopting this product for the structure is getting the subs familiar with it so that they don’t over bid because of fear of the unknown. I talked to some in another market that had recently completed their first projects and all were impressed with the ease of adopting and modifying.
I have been following the development of SIP’s for a while now. It looks like the next stage of home building.
One big drawback with SIPs is post-build modifications. It’s much easier and cheaper to do with stick frame. Think about how many changes of use/technology a house that lasts 100 years will go through. It’s why I went with stick frame.
“post-build modifications.”
Very few things destroy budgets faster than mid-construction change orders.
Roddy
SIP’s can cut down on your labor hours but beware of the little shocks like plumbing and electrical contractors bumping their bids by 25% because they might have to teach their employees a new trick.
Of course when you build with SIPs you are enclosing your family or tenants in a sealed box of toxic chemicals just like in standard construction, and have little temperature stability as you would have with a mass wall system. Insulation is not the same as energy storage.
Did I mention they burn like napalm? Think Paradise California.
My home valley along the McKenzie River in Oregon just burned to the bare ground last summer. The starting point was at a farm where I used to buck hay bales for jingle money in the summer. Even though I haven’t been back for years the thought of loosing the most beautiful river valley in the USA still gives me heartburn.
Anybody who builds anywhere in the woods from Santa Barbra to Vancouver BC without using a design that will withstand a firestorm is brain dead.
Bricks n Mortar
Brings to mind another modular construction scheme I’m familiar with. I used to be in the business of building large composite products– large yachts. One of my employees went to work for a computerized mold tooling company that had the contract to build the production molds for the first Boeing Dreamliner. The plan was to have my friend’s company build the tooling for the center fuselage, Boeing to build the parts in Renton, another company to build the tail in Italy, and the nose section in Japan.
As I walked by the multi-million dollar pre-preg autoclaved carbon mold I said to myself “this isn’t going to work.” Well it didn’t! The first prototype parts were so mis-matched that it set the project back by a year and they are still having problems with component fit. How did I know? I’d made the same mistake myself when my venture capitalist had pulled my funding plug for six months while a 60- hull was still in the mold. Theory sometimes needs to rely upon experience.
The Catera of Katerras.
Sounds like SoftbBank got too excited of its large proposed modular erections. One can only wonder, with all of SoftBank’s recent unicorn failures, when it will run out of financial Viagra.
1) Nothing was fitting well when they but the modules together ==>
bad model making, but mgt. didn’t care !!
2) They invested to expand total assets for high turnover, like China 20-30 years ago, because volume trump cost, while capex was financed by SoftBank.
3) It’s Not the opposite of the most successful stories.
4) Many co thrive with cheaper before better, generating volume, before switching to better before cheaper, for better profit margin, if they ever switch.
5) Unfortunately they hit a brick wall when commercial RE collapsed a year ago, before they had a chance to generate volume, or switch.
6) Paal is….
Katteras block diagram will be knocked off after
commercial RE hit a bottom, with better model making and much lower cost, while old and useless RE will be written off.
Where were (are) these terminated projects that are letting all the emoyees go? Bay area? Elsewhwere USA? Europe?
Across the US.
I wonder,are these ‘Bear Sterns’ and Lehman collapse, which preceded the GFC?
Bubbles don’t burst, just fizzeled out slowly first and then the real ‘thing’ happens!
Few words convey “scam” as succinctly as the word “innovation” does. Anyone using the word “innovation” at this point is telling you they are a conman hoping you are the mark.
For a handy guide to BS terms like innovation, I recommend John Patrick Leary’s book, Keywords: The New Language of Capitalism.
1) Hyperinflation/ hyperdeflation. Hyperdeflation isn’t linear.
2) Hyperdeflation : first, a 25%-35% plunge, followed by a bear market bull run.
3) After LPSY, there is a massive plunge, followed by an asymptote chart, hugging the zero line, osc widely, but always above zero (X- axis).
4) Example #1 : a 8-10 years TZA. From a certain point it’s huge losses cannot be recovered. TZA moved to a hospice bed, but it’s unrealized losses are good as gold. TZA unrealized losses can be used for future years profit, along with the 3K annual deduction.
5) Example #2 : after a future bubble collapse, the gov will rejuvenate the most important companies, sit on the board, dictate capex, dictate HR policies (party membership, BLM…), collect profit + dividends, dominating & controlling everything : ARAMCO.
6) Saving = current income – current spending. // Fred : Personal saving is down from 34% in Apr 2020 to 15% in Apr 2021.
7) According to the formula the current spending must be rising. The fear of inflation is real. Media + “Experts” as usual extrapolate. Conclusions : hyperinflation.
8) JP didn’t raise interest rates. Daily RRP to reduce clogging due to deflation fears.
9) If Zanet lift the EFFR pipeline, repo will punch a big hole in the boundaries and repo will leak, bleed badly.
Sent to me via email by a reader [I removed some details to protect the privacy of those involved]:
“I think i mentioned to you that I am a head hunter, mostly [specialty]. What is interesting, is that the VP Engineering [department] at Katerra was from [company name], a company that I have worked with over the years. When he left [company name] he asked me to recruit several engineers for him. I found a few candidates, close to making offers, but never did, I feel like I dodged a bullet.”
One thing for sure, we can definitely label Softbank as a transformational company.
Namely it’s ability to transform raw cash into nothing. It’s totally brilliant. They are even better than the Fed at value reduction.
Wolf, as a car guy you might appreciate this.
Back in the day I was contacted by a company called Advance Lithium to help with production design for the carbon Li battery containment module for the Fiskar EV. You may recall that was the sexy four door sport model that Elon Muskrat stole/copied for development into the Tesla Modes S. Anyway I got a close enough look at Advanced Lithium’s battery architecture to know that I wouldn’t install that bomb in anything less than a 2″ thick seamless stainless steel shell. So I ran like hell.
Rumor had it that the burn rate at Advanced was one million $$ a week. But it didn’t matter since it was a Paul Allen company, and by that time Paul had found more productive uses for his time, like perfecting some of the guitar licks from the tunes in his Jimmy Hendricks library.
No doubt the construction industry is ripe for tech disruption.When you allow your industry to get held up by low tech materials (lumber) something better is waiting. The automakers evolved from steel to plastic. Probably the biggest variable in construction is land. Transportation, water, electricity and proximity to labor all determine land value, hence we build up. The US is looking at a huge infrastructure bill and let’s hope the reactionaries, who want everything back to the 50s don’t get to define the terms. The difficulty with a little progress is that it often requires a whole lot more. We don’t need steel bridges because Elon Musk will invent a car that skips over the water :]
When did this tech-as-magic-dust start?
Some companies have always used fancier “apps” than others. In the 1920s some companies were using IBM punch-cards while others were using adding machines. The IBM users didn’t advertise the fact to magically raise their stock price.
If they gained efficiency, they would increase their dividend and the market would approve. The dividend was the magic.
Pol-to channel the great Mencken: “…never underestimate the credulity of
the American public when presented with the words: ‘…as seen on TV…’…”
may we all find a better day.
Softbank Group overall appears to be wildly profitable. Most of that profit is cap gains on IPOs of companies (Coupang), or selling on companies it owns to others.
I wonder how heavily leveraged it all is though. Also whether there’s risk to Softbank Group from it’s Vision Fund (theoretically a different entity, but it seems to generate most of the profit for the group).
Wolf, do you think there is any systemic risk from them? They seem to be interconnected with everything, everywhere.
SoftBank was profitable because the shares and valuations of its portfolio companies jumped. Some of this is hocus-pocus. When those shares or valuations dump, SoftBank will lose billions of dollars, as it has done not long ago.