Former Flextronics, Tesla CEO Aims to Disrupt Construction Industry

A startup construction firm, Katerra, has building projects in the works all over Northern California, but it has remained quiet until now about its unusual high-tech methods and its backing from finance, real estate, and technology heavyweights.

Katerra, a two-year-old company that says its technology platform brings the efficiency of electronics manufacturing to construction projects, announced Thursday it raised $130 million in a Series C fundraising round from Greenoaks Capital, Foxconn, DFJ, Paxion, Khosla Ventures, and Moore Capital Management.

The Menlo Park, CA-based company had already raised $87 million in earlier rounds before clinching the Series C capital. Founded in 2015, Katerra says it is now one of the top 25 U.S. general contractors involved in multi-family housing projects; it drew more than $500 million in bookings last year and has a global workforce of 550.

The company was co-founded by Michael Marks, the founder of Silicon Valley private equity firm Riverwood Capital, and former CEO of contract electronics manufacturer Flextronics. Marks, an early investor in Tesla, also served as interim CEO of the car company in 2007.

Katerra grew rapidly by securing its first contracts through its co-founder Fritz Wolff, executive chairman of The Wolff Company, a real estate private equity firm based in Scottsdale, AZ, a Katerra spokeswoman says.

Katerra, which defines itself as a technology company, set out to eliminate construction waste by harnessing digital technologies and emulating the assembly line processes of manufacturing.

The company says it makes its own construction materials, standardizes designs, and links its design tools to its supply chain infrastructure to arrange just-in-time delivery of building components to construction sites. It minimizes the number of outside vendors included in its projects.

According to a company statement, “the $12 trillion global construction market is primed for technological disruption.”

“While digital technologies have disrupted nearly every business sector, the construction industry has remained notably stagnant in most aspects of operation,” Katerra says in a press release about its Series C round. “Even in 2016, while other industries had massive investments in technology, 70 percent of construction firms dedicated 1 percent or less of revenue to technology, according to JBKnowledge.’’

Katerra makes building materials such as wall panels, floor truss assemblies, cabinetry, and door framing at its own factories. It anticipates that the workforce at its Phoenix, AZ, manufacturing plant will grow to 400 employees by the end of this year.

The company plans to build “numerous factories across the U.S. in the next few years,” a spokeswoman told Xconomy in an e-mail exchange. Katerra is also expanding internationally.

In California, Katerra has projects in the works in Santa Rosa, Sacramento, and Rocklin. While the company is currently focused on multi-family housing in the United States, it plans to apply its business model to all other sectors of the construction industry.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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