Troubled construction startup Katerra will shut down: report
SoftBank-backed company struggled with delays, cost overruns
Another SoftBank-backed startup has imploded.
The construction startup Katerra, which aimed to transform the $12 trillion global construction industry, told employees this week that it is shutting down, The Information reported, citing sources familiar with the matter.
According to the publication, the company plans to cut thousands of jobs — potentially without paying out severance packages or unused time off — and may end up walking away from construction jobs it was contracted to build.
Katerra was founded in 2015, and had received more than $1 billion in funding from SoftBank, which had also poured money into WeWork. At one point, it was valued at $4 billion.
The Information’s report says that a company executive cited the Covid-19 pandemic, along with soaring labor and construction costs as reasons for its latest financial difficulties.
But Katerra had issues prior to the pandemic. Its record of delivering on its projects was patchy, and the company struggled with delays and cost overruns. Though it had previously employed around 8,000 people, it laid off hundreds of employees last year.
The company also faced an investigation into its accounting practices by the Securities and Exchange Commission and by its board of directors, according to The Information.
Last year, the company was reportedly exploring the possibility of Chapter 11 bankruptcy proceedings, until it was bailed out by a $200 million cash infusion from SoftBank. That round of funding gave another SoftBank-backed company, Greensill Capital, a 5 percent stake in the company in exchange for erasing more than $400 million in debt. Greensill also collapsed earlier this year.
Katerra’s founder Michael Marks and CEO left the company last May. Paal Kibsgaard, the company’s most recent chief executive, departed last month.
The company has 2,434 employees, according to its LinkedIn page. A spokesperson for Katerra did not immediately respond to a request for comment. SoftBank also did not return a request for comment.
[The Information] — Keith Larsen