SoftBank-backed construction startup Katerra is shutting down

(As reported by Cromwell Schubarth, Tech Flash Editor, Silicon Valley Busines Journal)

Construction startup Katerra Inc., which had raised more than $2 billion since it was founded in 2015, is reportedly shutting down.

The company, which was based in Menlo Park, California, until recently, told employees Tuesday it plans to cease operations, The Information reported. It will let go thousands of employees and is likely to walk away from dozens of construction projects it had agreed to build, according to the report.

Katerra was one of the very early stage companies that quickly hit lofty valuations, thanks to an infusion of huge amounts of money from SoftBank. Founding CEO Michael Marks previously held the same role at Flextronics International Inc., now known as Flex. He said he could apply some of the same strategies employed by the electronics industry contract manufacturing giant to construction.

Marks stepped down a year ago and was replaced by Chief Operating Officer Paal Kibsgaard. Kibsgaard previously was CEO at Schlumberger, the world's largest oilfield services company, which is based in Houston.

Kibsgaard himself stepped down last month, The Information reported. The company is currently being led by representatives of turnaround consulting firm Alvarez & Marsal, according to the report.

Katerra is the second big SoftBank-backed company to shut down this year, following the collapse in March of Greensill Capital, a London-based financial technology startup. SoftBank was also a big backer of WeWork, which SoftBank CEO Masayoshi Son last week listed among his company's biggest investment failures.

In December, SoftBank led a $200 million recapitalization of Katerra. As part of that, Greensill agreed to cancel around $435 million in debt owed by the construction company in exchange for a roughly 5% stake in the business.

Katerra took on too many projects and side businesses when it was getting going, Kibsgaard told the Wall Street Journal at the time.

"I think we underestimated the complexity of executing self-perform projects at a large scale, including manufacturing and material sourcing and managing our own labor," he said.

The 8,000-employee company has offices around the world, including in Seattle. As recently as the December press release about that financing, Katerra listed its headquarters as Menlo Park. But it now says on its website its North American headquarters is in Houston.

Among its completed projects in Washington state are a Spokane Valley cross-laminated timber (CLT) factory, which uses artificial intelligence, a 243-unit Shoreline apartment project called the Postmark, and more recently, the 24-story M student housing tower in Seattle's University District. The company is also amid construction on a 180-unit Safeway mixed-use project in the U District that's being developed by Los Angeles-based Fields Holdings.