SoftBank leads US$865 mln investment in construction startup

January 25, 2018 13:50
SoftBank CEO Masayoshi Son and his monster $100 billion Vision Fund are betting on a startup that is trying to shake up the construction industry. Photo: Reuters

SoftBank's US$100 billion Vision Fund is leading an US$865 million investment in Katerra, a technology startup that uses an assembly-line-like system to construct houses and commercial buildings, the Wall Street Journal reports.

The three-year-old startup positions itself as a software provider to implement construction projects faster and at lower costs by controlling all aspects of the process from design to construction.

The company’s service offerings range from design, construction and manufacture of glued wood beams, to building prefabricated walls and fixtures in indoor factories, the newspaper said.

The SoftBank-led deal values Katerra at about US$3 billion. Bloomberg said the investors include a fund overseen by Soros Fund Management, the Canada Pension Plan Investment Board, Tavistock Group, and real estate investment funds Navitas Capital and Divco West.

Since it was established in 2015, Katerra has raised over US$1 billion in funding from the likes of Khosla Ventures and iPhone manufacturer Foxconn Technology, the WSJ said.

Michael Marks, Katerra's chairman and co-founder, said the startup's biggest appeal is its ability to save developers' time, which leads to better financial returns on projects that typically involve high-interest loans.

By the end of the year, “we think we can build from foundation to the keys in 30 days”, he said, noting that such a project typically takes a year to complete.

Marks, a former chief executive at electronics manufacturer Flextronics, said Katerra has 15 new clients, including some large institutional developers he declined to name.

The company has a team of 1,300 currently and plans to expand to 3,000 by year-end.

Since its started, the company has received more than US$1.3 billion in bookings for construction projects, including residential, hospitality and student housing, Marks told the Journal.

In an interview with Bloomberg, Marks said he expects sales of US$10 billion within the next decade. “It’s very similar to Uber or Airbnb or WeWork,” he said. “It’s tech guys in Silicon Valley driving into a new industry that has never had any technology. Construction is one of the worst.”

Vision Fund made about 100 investments with a total value of US$36 billion in 2017, more than the combined investments of venture capital firm Sequoia Capital and Silver Lake for the year, Bloomberg said, citing data from research firm Preqin.

The tech fund has also invested in companies that disrupt traditional industries, such as leading co-working space provider WeWork and an indoor-farming company Plenty.

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