Custom prefab factory construction of buildings is already a multi-billion dollar unicorn

Katerra is taking systems approaches to remove unnecessary time and costs from building development, design, and construction.

Katerra is off to a fast start with more than 1500 employees, offices in four countries, a growing number of factories, and dozens of active projects.

Softbank invested $865 million into the construction startup Katerra who will source all parts for a detailed building design and build it in a factory and then send modules for onsite assembly. Katerra’s post-money valuation is more than $3 billion.

Katerra runs the process of getting a building up and people inside it from the architectural design components all the way through labor management and renovation.

In January 2018, Katerra said it had $1.3 billion in customer bookings so far for new construction ranging from residential to hospitality and student housing.

Over the past 80 years, industries in the U.S. such as manufacturing and agriculture have increased their productivity by 10 to 15 times, but one industry seems stuck in place: construction. Construction has enjoyed the lowest productivity gains of any industry over the past twenty years – which presents an opportunity for firms to leverage technology and digital supply chains to dramatically improve productivity in the $10 trillion industry.

Katerra’s Solution

Katerra is fundamentally rethinking construction and is working to become an “end-to-end”, vertically integrated builder. It claims that “when the entire building process is owned by a single team from end to end – bringing design, manufacturing, material sourcing, and construction together intro one streamlined system – it is possible to build high quality, beautiful buildings, faster and at a lower cost.” On the production front, the company has built a 200,000 SF factory in Phoenix, AZ where it can manufacture various components of a building, such as whole walls complete with windows, plumbing and electrical wiring hookups. These “parts” can then be shipped and installed at a building site, aided by technology that tells cranes and labor where and how to assemble the finished materials. By manufacturing and assembling the various components of a building at its factory, Katerra endeavors to reduce the variability associated with building on-site, as well as reduce inventory build-ups.

* They are constructing building panels/components of the buildings inside the factory, but not entire rooms or modules.
* The cost savings in shipping the panels to the site are better than modules or units, which is what others have done.
* They are rethinking the entire process from end to end, using technology to modernize it wherever possible.

The combination of those three assets set Katerra apart and have driven their tremendous growth to date.

They are currently focused on larger construction projects.

A month before the Katerra deal, SoftBank led a $450 million investment in startup real-estate brokerage Compass, and a $120 million investment in home-insurance startup Lemonade. In August 2017, the fund invested $4.4 billion in coworking giant WeWork.

SoftBank is holding deal talks with OpenDoor, a startup which buys homes directly from owners and sells them, according to sources familiar with the situation. Founded in 2013, OpenDoor is now buying more than $1 billion worth of homes per year.