The Real Deal New York

“Every day is a fire drill”: Construction startup Katerra struggles to stay on track as it scales up

Company facing problems with delays and quality control
August 27, 2018 09:00AM

The Katerra factory in Phoenix and Katerra’s CEO Michael Marks (Credit: Katerra)

Construction startup Katerra — valued at $3 billion following an $865 million funding round in January including SoftBank — is struggling with delays and quality control as the company tries to scale up.

Many in the real estate industry are paying close attention to the three-year-old company, which aims to cut costs by streamlining the construction supply chain.

But the company’s faced challenges such as scaling up automation at its flagship factory in Arizona, which had to be shut down soon after it opened because it lacked proper building permits, the Information reported.

And Katerra has struggled to find a way to install plumbing and electrical systems inside wall panels at the factory, leaving more work for crews to do on the construction site, according to the Information.

One former Katerra manager said that, “Every day is a fire drill.”

The company’s also faced turnover in several key positions.

Company co-founder and executive chairman Michael Marks, a onetime CEO of Tesla, said the turnover was “at our request as we sort out who the long-term players are.”

He told the Information via email that the company has been making substantial progress.

“We’re doing great in all respects, growing revenue, increasing margins, breathtaking backlog, rapidly falling losses,” he wrote.

After a series of acquistions, the company has roughly 3,000 employees.

Katerra is expanding to India and the Middle East, and has looked to do construction for a planned SoftBank-backed tech city in Saudi Arabia, people close to the company told the Information.

But some developers have concerns about the company’s performance.

“Customers are frustrated that what they’re delivering isn’t good. Whole orders need to be canceled. [Katerra is] slowing down the process, as opposed to speeding it up,” a person in the real estate industry told the publication. [The Information] – Rich Bockmann