The prefabricated construction company just took a $865 million investment from Softbank.
Browse number:484 Release time :2018-02-09 09:14:46

The invested company is Katerra.

After the investment, Katerra was valued at more than $3 billion whose co-founder and chairman Michael Marks also was CEO of Tesla. Currently, Katerra’s projects valued at more than $1.3 billion and its investors consists of Softbank, Foxconn and Defund Growth Funds.

Why did the company obtain so much investment?

Briefly speaking:

1)      Very fast construction and refunding;

2)  Good quality and full construction process.

Almost one year construction traditionally and 30 days with Katerra way (including the time of foundation).


Katerra deals with integration of prefabricated building industry chain (design and R&D + supply chain management + construction management, connected in series by technical means and tools), as shown below:


Like Tesla's model, many key architectural components and parts are developed, designed and processed and produced by Katerra itself: conceptual design – plan design - research and development - construction drawings - construction bidder- construction management - construction - after-construction service, in a word, one-stop service. All the operation and businesses to be done by developers shall be depended on Katerra.

Here is a description of Katerra's business model.


Full process of Katerra's business model


What is Katerra's house like:



Lifting


Katerra’s 20,000㎡ factory in Phoenix



Katerra’s new factory



Major houses introduction


Currently Katerra’s major market is in the United States, specializing in the provision of 5 residential buildings:


1) Family apartment



2) Student apartment



3) Apartment for the elder


4) Residential community



5) Villa


Katerra currently employs 1,300 people and its staffs are expected to reach 3,000 by the end of 2018. And Softbank is ready to invest more than $90 billion in construction industry.



Concerning reports


According to Wall Street Journal, supported under technology-driven modular design and construction technology, construction industry can benefit from the scale effect as the consumer electronics industry did before. A new wave of interests shown by Tech startups to prefabricated construction and modular building is expected to reduce operating costs and improve productivity across the construction industry.

The global housing crisis has many causes, but there is a lasting cause that we should be able to solve now: productivity.


Although components and materials price for almost any other item (cars, mobile phones, clothing, etc.) has fallen dramatically, building still remains a high cost. Jan Mischke, one senior fellow from McKinsey, points out that in the past 60 years, manufacturing industry’s productivity has increased by seven times, but the productivity in construction industry is almost unchanged.


Not like electronic devices like iPhone, buildings can not benefit from scale effect, as it must be suitable for where they are built.


Building houses like Lego bricks;


As usual, technologists think there must be a solution. They are surprisingly reclaiming to adopt some of the old ideas in construction industry, such as PC parts and modular buildings for prefabricated houses and apply all automation technology in auto and other manufacturing industries. By that, robots may be able to replace more workers to construct more affordable houses.

Katerra has raised $22.1 million financing based on its evaluated value of more than $1 billion. Expectedly, its turnover this year will reach $500 million. To some extent, the company can be called a pioneer in the current wave of interests in technology start-ups of construction industry.


Katerra is committed to making the entire wall, including windows, insulation materials, wires and plumbing, etc.


The company has a factory in phoenix now, covering an area of 200,000 square feet, where the entire wall including windows, insulation materials, wires and plumbing, etc is produced.

Katerra adopts an integrated computer-aided design and manufacturing system to instruct factory how to make all of the building's components. The same system is also used to connect lifts on the construction site how to lift and reinstall the finished wall plates.

Kat

Katerra delivers the finished prefabricated walls to construction sites and then install them together like doing on Lego. The company aims to open 6 plants in two years, with each plant serving a different geographical area. Michael Marks, Katerra's chairman, founder and former CEO, says, “These plants will cover the entire market in US”.



One worker in Katerra’s plant in Phoenix


In the construction industry with total value of over $1 trillion a year, Katerra is facing a fierce market competition. According to Marks, Blueprint Robotics, one Baltimore startup, is also implementing a business process similar to Katerra’s. Both companies are sourcing robots and related building systems from manufacturers in Austria, Germany and Japan where such prefabricated constructions are very common. Blueprint Robotics declined to comment on this article.


Katerra is responsible for the works from building designing to final construction, which it thinks can further reduce operating costs. In area of consumer electronics, so-called “manufacturability design”, which means redesign of the device's shape and function to reduce its manufacturing costs -- is a standard process. Another idea that Katerra referred to from consumer electronics industry is ordering goods directly from suppliers.


Some startups are also building entire rooms that can be stacked vertically. Google recently announced that it had placed an order with Factory OS, a start-up company, to make 300 houses for its employees. This is the first order for the startup company. Factory OS CEO Rick Holliday said that every unit built with modular construction technology saved construction cost of $105,000, or less $700 per unit. Google believes that modular architecture also can help protect the ecological environment and reduce pollution and wastes.


The tallest modular tower with 32 floors and 363 apartments, built with 930 modules up to now.


The highest modular building by far is in Prospect Heights, Brooklyn, was completed in November 2016 by a traditional construction company called Forest City Ratner, which explored prefabricated structure construction. The company set up a plant in Brooklyn navy yard. According to executive vice President Bob Sanna of Forest City Ratner, more than 200 people built and completed independent "modules" during the busiest project phase- each single bedroom apartment is in the charge by 3 people.


Barriers in development:


Despite of the success in the project, it is reminded that some pains still exist in these new building technologies. Forest City Ratner has worked with Swedish construction giant (Skanska) to jointly run a modular building factory, but their cooperation came to an end because of dispute between them after the completion of the building was delayed.


It should not be surprising that traditional companies are testing prefabricated structures and modular buildings, especially for complex building components such as bathrooms and staircases. Sanna says, this kind of construction technology can save costs, for example, decreased construction site supervision, much easier inspection work and lower labor costs.


From Frank Lloyd Wright’s “American Wind House” to Palacio Hotel completed in a recorded working time at San Antonio, many architects have piloted modular construction projects in history. So why didn’t these programs become mainstream until now?

From the feedback of suppliers and customers, they generally believe that the biggest development obstacle for modular architecture is the habitual thinking mode of people. Construction is a relatively conservative industry, and old habits are hard to break. According to Tom Hardiman, executive director of Institute of Modular Buildings, the popularity rate of modular buildings in Europe and Asia are relatively higher than in the United States. Such kind of buildings only accounts for less than 3% of new buildings in the United States.


Modular architecture is also much more sensitive to market demand. Mishike from McKinsey Global Institute points out that 3000 to 5000 sets of new prefabricated housing orders should be placed each year and the distribution range from the construction sites should be less than two hours' drive from component factories, then those factories can make profits. For the United States, people get older and demanding to housing demand is very high. However, most demand for housing is in cities where the scarcity of land resources is limiting modular building market. After all, not like mobile phones, we can not just leave old houses in a drawer and run to get the latest version.


Sourcing: Integration Collection, Netease Technology Report.

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