Thursday, August 23, 2018

Is Katerra Following in Blu Homes’ Footsteps?

Insiders at Katerra, an ultra modern component manufacturer for the construction industry, say it has become a revolving door of executives, many of whom know little about the construction industry, an error-prone factory and persistent construction delays.

Katerra, founded in 2015, was recently valued at $3 billion but that may change as it has reportedly experienced production-based delays, high executive turnover and design errors that could potentially derail its mission to revolutionize the construction process.

A few years back Blu Homes was considered the ‘darling’ of component construction with their folding homes that could be shipped by conventional transportation, unfolded and finished at the job site.

Investors from around the world dumped millions of dollars on them allowing them to bring on a full staff of Architects in Michigan and open a huge factory in California. Wine and Cheese Open Houses across the country started to be known as “Whine and Cheese” parties as sales in any substantial numbers never materialized.

Then Blu Homes closed their Michigan offices and moved everything to CA. Shortly thereafter they closed their factory, changed leadership not once but twice in a very short period of time and announced that they were retreating to Northern California to build their homes.

Bill Haney, one of the founders, moved onto another industry where he is once again garnering investment money.

Katerra has raised more than $1 billion from major investors like Foxconn and SoftBank Group Corp., but has yet to complete a major project using its end-to-end design, manufacturing and construction model.

Current Katerra employees say that "every day is a fire drill" and that Katerra is trying to "hedge its bets" through side businesses including apartment renovations and selling China- and Mexico-sourced materials to developers.

Upstart ‘disruptor’ Katerra is trying hard to be successful but if the people actually driving the bus don’t have any hard core experience in large scale construction they may find themselves on the same road as Blu Homes.

There are other new ultra modern component manufacturers that have opened on both the East and West Coasts in the past couple of years after landing huge investments which begs the question if they are the real deal or are they as unprepared for the future as Katerra and Blu Homes appear to be?

Source Credit: Inside the Struggles of a Softbank-Backed Construction Company


Unknown said...

Where on the east coast in a modern component manufacturing facility? We have a client with a large need. Philip Matthews

Anonymous said...

Coach, you are 2 for 2 in predicting which major builders will fail. Let's hope you don't go 3 for 3.

Anonymous said...

RE modern eastern component facility

I know on none zero, with any ..right now substantial ...volume capability, do you Coach?

Tom Hardiman said...

Hi Coach,

I don't think it should be a surprise if Katerra is facing some challenges with staffing - isn't everyone? I also do not think they will go the way of Blu Homes. Seems like more people have come to the realization that the labor shortage isn't going to resolve itself and we have to find "alternative" ways to build.

Katerra has ALREADY helped change the industry by bringing so much positive attention to the idea of "industrialized construction." I hope short term expectations for ROI by investors don't derail their long term plans.

Coach said...

I sure hope they don't follow Blu. It would be a shame if they did and it could hurt an entire industry.

I do find it interesting that almost a billion dollars in investment money was thrown at a company in 2015 that only had a dream and a couple of workers swinging hammers.

That kind of investment money will dry up completely if they fail.

Anonymous said...

As a former manager, I totally agree. I have seen a lot of smoke and mirrors as investors shuffle through the plant. Equipment not functional made to look like it did the job, when it most definitely did not! I have seen managers and supervisors come and go in my short 1 year employment with them. Total chaos as HR calls all the shots. Investors beware.

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Unknown said...

Thanks Coach - The way I see it any start up is going to have its ups and downs. The building material industry is slow to change. Between 1910 and 1929 a lot of progress was made - not just Sears but Alladin, Bennett, Wachsmann, Gropius all made contributions. Since shortly after WW2 and when suburban development kicked into gear things have not progressed all that much in the housing sector - people did try - General Panel - Lustron - Nixon/Romey/HUD etc..... We are at the cusp of next generation progress in the housing sector. The day of the digital carpenter has arrived. It is all of our collective responsibility to make this stick.