Last week the construction startup Katerra declared that it was shuttering it’s US operations, putting another L on the board for Softbank’s Vision Fund. It is walking away from numerous in-progress construction projects, its employees are being let go, and its assets are being sold.
The immediate cause of Katerra’s bankruptcy seems to be the bankruptcy of Greensill Capital, another Softbank-backed startup. At the beginning of 2021, under severe financial strain, Katerra underwent a recapitalization that cut its valuation by 90% (from $4 billion down to $400 million). As part of this, Katerra negotiated away a $440 million debt owed to Greensill, a supply chain finance company. But a few months later, Greensill itself went bankrupt, and the owners of this debt (Credit Suisse) are claiming that Katerra still owes it, which is apparently preventing the company from getting construction bonding. Since the debt is more than the current value of the company, that obviously presents a challenge.
Despite the scale of Katerra (it raised over $2 billion in venture capital, had offices in 9 countries, and employed over 8000 people at its peak), very little information about the company’s internal operations was ever public, and it got comparatively little press attention. Most of the takes and analyses diagnosing Katerra’s problems aren’t particularly well-informed - none, for instance, even get Katerra’s basic business model correct.