Last week the construction startup Katerra declared that it was shuttering it’s US operations, putting another L on the board for Softbank’s Vision Fund. It is walking away from numerous in-progress construction projects, its employees are being let go, and its assets are being sold.
Great post. I always thought complete vertical integration was the right approach and was hoping to find a good summary of where Katerra made a wrong turn. Hopefully another company can pick up the torch and run with it.
Excited to find your substack. Regretful that Katerra didn't quite understand the complexities that the construction industry faces today. I was looking forward to seeing their San Marcos, TX factory up and running as I live in Austin. You are doing an excellent job of chronicling how poorly humanity understands our current state of construction efficiency.
Forgive my ignorance but I don't understand who Katerra's customer was and what value Katerra delivered to them.
Years ago, we had a panelized company in this region. They sold to builder/dealers - who were few because the construction process was a bit foreign to traditional stick builders. They promoted construction in climate controlled buildings and consistency. These didn't have much benefit to the builder. The builder/dealer ended up making about the same. The end cost was higher to the homeowner. In short, it was a superior product and process but the incentives weren't aligned through the channel. Plus, paradigm shifts are difficult, especially with conservative audiences such as you'll find in construction.
Great writeup. We're actually a building materials supply company too, and we've analyzed Katerra's strategies (when they were just starting) and did our best to learn on the mistakes of others.
While we can manufacture custom finishes for custom projects, we offer what developers want, and do extend the discounts. Also, we're not building anything - just focusing on streamlining supply chains and sourcing/scheduling/logistics for those who build. Check us out - www.megasupplypro.com
Question from a layperson: Why did Katerra take this route? Why not, as a startup, begin by making pre-fab tool sheds, then pre-fab garages, then pre-fab tiny houses, then pre-fab normal houses, then small pre-fab apartments, then pre-fab high-rise apartments, etc.? Would things have been different had Katerra ramped up the complexity of its undertakings more gradually?
amazing post, seems like what killed them could happen to any start up really, lack of product market fit, lack of direction/ defined culture (acquisitions) , took on too big a scope initially, and all this compounded by the fact they were operating in the world of atoms were pivots are cheap like software (lots of $$$ needed). still think the vertical integration and factory assembly of panels / volumes with on site assembly is the right approach just need to find a good entry point
Great post. I always thought complete vertical integration was the right approach and was hoping to find a good summary of where Katerra made a wrong turn. Hopefully another company can pick up the torch and run with it.
great article - thank you for sharing the story; keep them coming: the industry is listening. #stardust incoming
Excited to find your substack. Regretful that Katerra didn't quite understand the complexities that the construction industry faces today. I was looking forward to seeing their San Marcos, TX factory up and running as I live in Austin. You are doing an excellent job of chronicling how poorly humanity understands our current state of construction efficiency.
Interesting. And a very intriguing product.
Forgive my ignorance but I don't understand who Katerra's customer was and what value Katerra delivered to them.
Years ago, we had a panelized company in this region. They sold to builder/dealers - who were few because the construction process was a bit foreign to traditional stick builders. They promoted construction in climate controlled buildings and consistency. These didn't have much benefit to the builder. The builder/dealer ended up making about the same. The end cost was higher to the homeowner. In short, it was a superior product and process but the incentives weren't aligned through the channel. Plus, paradigm shifts are difficult, especially with conservative audiences such as you'll find in construction.
Great writeup. We're actually a building materials supply company too, and we've analyzed Katerra's strategies (when they were just starting) and did our best to learn on the mistakes of others.
While we can manufacture custom finishes for custom projects, we offer what developers want, and do extend the discounts. Also, we're not building anything - just focusing on streamlining supply chains and sourcing/scheduling/logistics for those who build. Check us out - www.megasupplypro.com
Question from a layperson: Why did Katerra take this route? Why not, as a startup, begin by making pre-fab tool sheds, then pre-fab garages, then pre-fab tiny houses, then pre-fab normal houses, then small pre-fab apartments, then pre-fab high-rise apartments, etc.? Would things have been different had Katerra ramped up the complexity of its undertakings more gradually?
amazing post, seems like what killed them could happen to any start up really, lack of product market fit, lack of direction/ defined culture (acquisitions) , took on too big a scope initially, and all this compounded by the fact they were operating in the world of atoms were pivots are cheap like software (lots of $$$ needed). still think the vertical integration and factory assembly of panels / volumes with on site assembly is the right approach just need to find a good entry point
Such an interesting feedback, thanks for sharing