A US company that is trying to revolutionise homebuilding by applying lessons learned in the electronics world has raised $865m in an investment round led by SoftBank’s Vision Fund.
The two-year-old start-up, called Katerra, aims to take over all aspects of supply-chain management and construction for home developers, much as Taiwanese manufacturer Foxconn assembles the iPhone for Apple.
“It’s a huge industry and there’s nobody in it like us,” said Michael Marks, chairman and co-founder. The company, which operates from a factory in Arizona, already has $1.3bn of committed orders from developers and hopes to build another four or five facilities by the end of next year, he said.
Mr Marks was one of the founders of the outsourced manufacturing model underpinning the modern electronics industry, having spent 13 years as head of contract manufacturer Flextronics before leaving to become an investor a decade ago. Others directors include Jim Davidson, one of the founders of tech buyout firm Silver Lake, and John Hui, head of strategy at Foxconn.
The construction industry has been one of the least influenced by IT-related productivity improvements. That has led to the emergence of a wave of so-called “constructech” companies using software to try to streamline operations, as well as attempts to standardise construction using modular techniques.
By trying to take on all aspects of a huge industry it puts at $12tnglobally, Katerra has bitten off far more. The services it claims to offer extend from handling the architecture and engineering process at the start of a new development, to manufacturing standardised parts such as door frames and other components in its own factory before assembling them on site. Mr Marks said this meant the company could integrate the entire process, resulting in efficiencies not otherwise available.
Katerra hopes to drive down costs by ordering materials for multiple developments at once, giving it negotiating leverage over suppliers, and by developing manufacturing techniques to lower overall construction costs.
The comparisons with the outsourced electronics industry only run so far, however, and Mr Marks conceded that the company faced some challenges that are very different. These include the need to design each building to fit a particular site and meet local requirements, as well as a lack of training in many building trades that has led to highly variable quality.
In one sign of its ambition, Katerra recently broke ground on an $85m factory in the US state of Washington that it said would be the world’s biggest maker of cross-laminated timber, a more ecologically friendly building material that is increasingly being used instead of concrete and steel.
The diversion into constructech represents another new direction for the Vision Fund, which has already expanded its remit into real estate through an investment in WeWork as it races to put its $93bn of capital commitments to work.
The investment, which lifts the total amount Katerra has raised to almost $1.2bn, values the company at more than $3bn, including the latest round, said Mr Marks.
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