The tumultuous six-year run of the high-profile construction startup Katerra ended on Tuesday, when the company's leadership told employees that the company would fold, shuttering U.S. operations and letting go some 2,400 employees. First reported by The Information, news of the collapse reached employees on Tuesday in a company email stating that Katerra "must wind down the majority of its U.S. business operations, effective immediately. Unfortunately, most of our U.S. employees will no longer be working for Katerra in the near future.”
The email also explained that, following the bankruptcy of its former lender Greensill, Katerra has been unable to secure debt for its construction projects and "is sorting through suspended operations, asset sales and divestitures, in- or out-of-court restructuring alternatives and other possible actions.”
Executives then informed Katerra's employees that the company lacked enough funding to pay severance packages or reimburse employees for unused paid time-off.
Founded in 2015, the Menlo Park, Calif.–based startup aimed to revolutionize the construction sector, streamlining the design, manufacturing, and delivery process with a systems approach. Thanks to lavish funding, the company grew rapidly, acquiring the Vancouver, British Columbia–based mass-timber specialist Michael Green Architecture and Atlanta-based Lord Aeck Sargent in 2018, and boasting as many as 8,000 employees and between $2 and $3 billion in revenue. In 2019, when Katerra introduced its own software platform, co-founder and then-chairman Michael Marks sat down with ARCHITECT to discuss the launch and the company's ambitions.
"It’s not really a big secret because we plan to do basically every building type over time," Marks said.
In the spring of 2020, however, Marks stepped down from his position, with Katerra announcing chief operating officer Paal Kibsgaard as its new CEO and "several hundred million in new financing from SoftBank Vision Fund," an investment expected to ensure that "[Katerra] is well-positioned for long-term growth."
As 2020 drew to a close six months later, the company announced that it would recapitalize to eliminate debt, with SoftBank providing an additional $200 million in funding to keep the company afloat. In May, SoftBank founder Masayoshi Son pointed to Katerra as one of his company's biggest mistakes, foreshadowing Katerra's collapse less than a month later.
Since Katerra's announcement on Tuesday, MGA has released a statement explaining that the firm, although saddened for the individuals impacted by Katerra's closure, is "grateful that these actions have no impact on our operations, other than the movement of MGA shares back into our control."
"We are fortunate that we have been insulated from Katerra’s challenges because Principals Michael Green and Natalie Telewiak have been and remain the controlling Directors of the firm."
Although the firm cannot give further updates at the time, Lord Aeck Sargent also commented on Katerra's announcement in an email to ARCHITECT.
“Lord Aeck Sargent is in active negotiations to reemerge as an independent design firm, backed by our deep history of professional practice since the 1940s," said Lord Aeck Sargent president Joe Greco, AIA, in the email. "We are excited about our new chapter and look forward to continuing our exceptional client service and responsive design work, long into the future.”
This story has been updated with a comment from Lord Aeck Sargent.