How Katerra's Facade Crumbled
Another softbank-backed 'real estate related' startup is a shit show https://www.theinformation.com/articles/how-kater…;“Everyone seems to have a credit card, and there’s no accountability and people just run amok"
So they built a giant construction company by using VC money to buy a bunch of GCs, and got business by underbidding jobs...producing losses that were compounded by general company-wide sloppiness. And those losses were filled in by more VC money. Sounds like a real winning strategy.
Although the scale and dollars involved are higher in this case, Katerra's story shares some common features with the stories of other construction tech startups. A bunch of Silicon Valley guys take an outsider's look at the construction industry and see low-hanging fruit. They see a bunch of morons, low-tech mom and pop operations using antiquated technology, an industry ripe for disruption. They make a slick pitch deck and get VC funding based on a vague strategy of smart tech guys + capital + prefabrication. Then, as they get into the weeds, they relearn what people who work in the industry already know.
Not saying that there will never be improvements in the state of the art in construction tech. But the improvements won't come from this approach.
Paul Graham
@paulg
Sep 9, 2020
It's a bad sign when a startup brags that it's disrupting some industry. The success or failure of startups depends on the effect they have on users, not the effect they have on industries. Disrupting industries is incidental.
I have a good friend at SoftBank, and told him over 2 years ago it was going to blow up on them...
I mean... isn't this broadly applicable to the entire VC/startup world in general? It seems to me that most of the venture capital world is deeply flawed, and valuations and business growth strategies are enormous piles of dogshit, and that the only differentiating factor is who is willing to call one out over another.
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