Modular prefabrication company and timber innovators Katerra has reportedly been saved from bankruptcy by a $200 million cash infusion from Japanese investment giant Softbank, according to the Wall Street Journal.
In addition, Softbank is taking another 5 percent stake in the company, making it Katerra’s majority shareholder.
Although Katerra promised to bring “the Silicon Valley approach to building” (as heard in our 2018 profile of the then-fledgling company), it appears to have ironically done so. Buoyed by massive hype and investments from venture capitalist backers, including Softbank’s Vision Fund, the company went on an expansion spree, snapping up Michael Green Architecture and Lord Aeck Sargent in 2018. That same year Katerra merged with Indian technology company KEF Infra to expand its international reach, and in 2019, they opened a cross-laminated timber (CLT) factory in Spokane Valley, Washington.
However, things haven’t been all rosy. This year, impacted by the coronavirus pandemic, Katerra first cut 3 percent of its worldwide staff in April and cut higher salaries, then laid off another 7 percent of its workforce in July, citing profitability. Aside from selling off incomplete projects, the design-build startup saw turnover at the top as CEO and co-founder Michael Marks left and was replaced by Paal Kibsgaard in May.
On Wednesday, December 30, 2020, Katerra’s shareholders approved the investment from Softbank’s Vision Fund 1; a $200 million investment following the other $200 million Softbank moved into Katerra in May after Kibsgaard took over with the promise of turning things around. Before the latest round of investment, the Japanese conglomerate had already dumped $2 billion into Katerra, but this time circumstances appear more dire.
According to the WSJ, Kibsgaard told investors that the latest infusion was needed to stave off filing for bankruptcy and would assure the company’s continued operation. In exchange for another 5 percent stake, Softbank convinced Greensill Capital, a capital financing firm they’ve also backed, to drop the $435 million Katerra owed in debt.
“The decision to recapitalize follows a thorough review of options available to us to enhance our financial strength and ensure Katerra’s ability to continue to pursue our goal of transforming the construction industry,” said Kibsgaard in a press release. However, Softbank’s continued involvement couldn’t help draw comparisons to their ill-fated involvement in WeWork from cheekier outlets.
