SoftBank-backed Katerra to slash 200 Jobs, close Arizona factory

FILE PHOTO - SoftBank Corp. placard is prepared during a ceremony to mark the company's debut on the Tokyo Stock Exchange in Tokyo, Japan, December 19, 2018. REUTERS/Issei Kato/File Photo

Katerra Inc., a modular construction startup, got an $865 million cash infusion from investors led by SoftBank Group Corp. last year. Now, the company is shutting down a factory in Phoenix and cutting 200 jobs.

The move will shift Katerra’s manufacturing away from Phoenix and into its highly automated and lower-cost factory in Tracy, California. The transition will help the company grow more quickly in the U.S. and overseas, said Katerra Chief Executive Officer Michael Marks. It will also put the startup on track to turn an operating profit by the end of next year, and to double revenue to about $4 billion, he added.

Of the cost-cutting, “that’s never good news for the people getting laid off,” Marks said.

SoftBank’s investment into Katerra adhered to its typical playbook of pumping big money into potentially transformative startups. Katerra’s mission is to shake up the construction industry with a combination of efficient factories, prefab parts and modular construction units. But SoftBank’s methods proved risky this year, when one of its major investments, co-working startup WeWork, was forced to scrap plans for an initial public offering once investors got a look at its finances and corporate governance.

Katerra’s large investment from SoftBank’s Vision Fund allowed for rapid growth, in part driven by the acquisition of smaller construction companies. But integrating the other businesses hasn’t always gone smoothly, and Katerra has been dealing with construction delays and issues with perfecting its modules, such as wall panels and floor panels.

“We’ve had some learnings,” said Matt Ryan, head of manufacturing for Katerra. “We’ve worked with lead engineering and architects to address those.”

Marks, a onetime interim CEO of electric automaker Tesla Inc., called such challenges normal in the construction business, and defended SoftBank’s deep-pocketed investment strategy, driven by CEO Masayoshi Son.

“There’s no question that if they hadn’t led a bigger round than we expected, we wouldn’t be where we are today,” Marks said, listing projects across the U.S., and in India, Saudia Arabia and other countries.

Many of Katerra’s contracts and some of its top hires come directly from introductions made by SoftBank, he said, including that of the recruiting firm that found Katerra’s new chief financial officer, General Electric Co. veteran Matthew Marsh. SoftBank can also be credited for lining up business for Katerra from other Vision Fund companies, including WeWork parent We Co. Katerra is designing a pantry and lighting system for use in future WeWork projects.

Of the Vision Fund’s 88 portfolio companies, some are “just doing so wildly fabulous, and no one ever writes about that,” Marks said, calling much of the criticism about SoftBank “inflammatory.” Some of the Vision Fund’s fast-growing companies include South Korean online retailer Coupang and blood-testing company Guardant Health Inc.

Katerra plans to keep the Phoenix factory operational through the end of the year. Marks said that despite the timing during the holiday season, he hoped that employees would be able to quickly find new work. Workers who are affected will get a 90-day severance package that includes full pay and benefits, the company said.

In addition to the 577,000-square-foot Tracy factory, Katerra also recently opened a 270,000-square-foot cross-laminated timber factory in Spokane, Washington, at a cost of $130 million, and will open another production factory in Texas next year.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.