Sign up for our daily briefing

Make your busy days simpler with the Axios AM and PM newsletters. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to the Axios Closer newsletter for insights into the day’s business news and trends and why they matter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios Pro Rata

Dive into the world of dealmakers across VC, PE and M&A with Axios Pro Rata. Delivered daily to your inbox by Dan Primack and Kia Kokalitcheva.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with the Axios Sports newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with the Axios Des Moines newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with the Axios Tampa Bay newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Nashville news?

Get a daily digest of the most important stories affecting your hometown with the Axios Nashville newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Columbus news?

Get a daily digest of the most important stories affecting your hometown with the Axios Columbus newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Dallas news?

Get a daily digest of the most important stories affecting your hometown with the Axios Dallas newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Austin news?

Get a daily digest of the most important stories affecting your hometown with the Axios Austin newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Atlanta news?

Get a daily digest of the most important stories affecting your hometown with the Axios Atlanta newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Philadelphia news?

Get a daily digest of the most important stories affecting your hometown with the Axios Philadelphia newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Chicago news?

Get a daily digest of the most important stories affecting your hometown with the Axios Chicago newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top DC news?

Get a daily digest of the most important stories affecting your hometown with the Axios DC newsletter.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Annelise Capossela/Axios

Katerra, a Silicon Valley construction tech startup that had raised around $2 billion from firms like SoftBank, has filed for Chapter 11 bankruptcy protection.

Why it matters: This was ultimately about the folly of pattern-matching, a pervasive VC technique whereby the same sorts of founders get both funded and forgiven.

  • Katerra was co-founded and led by Michael Marks, the former Flextronics CEO who had sat on the boards of such companies as Schlumberger and SanDisk. He also co-founded private equity firm Riverwood Capital and was a partner with KKR.
  • The basic idea was to make building components off-site, with Katerra eventually booking billions of dollars in project orders.

What went wrong: The best breakdown I've seen came from Cory Weinberg at The Information, who was first to report that the board was presented with "intentionally misstated" financial reports, after Katerra had fallen short of projected performance.

  • Per Weinberg: "According to interviews with 30 former employees and investors, Marks presided over a company that repeatedly stumbled on construction projects and failed to address warning signs that the business was failing."
  • A Katerra investor tells me that Marks kept getting the benefit of the doubt because of his track record. "This is a guy who's run giant companies and sat on major corporate boards. He can't be hiding the ball, or not able to find it. Right?"
  • Another investor added: "The vision was solid. The execution was not, and the execution was the part I was less worried about because of Marks and his experience with big, complex businesses like Flextronics."
  • The music eventually ended for Marks, who was fired last year as the SEC opened an investigation into Katerra's financials.

Contributing factors: SoftBank's largesse didn't help matters, particularly as it encouraged Marks to engage in a WeWork-style expansion that would lead to dozens of office leases and three corporate jets.

  • SoftBank also decided not to step up this year with new cash once its primary lender, SoftBank-backed Greensill, filed for its own bankruptcy.
  • That meant Katerra couldn't get its construction projects bonded, which proved to be the proverbial straw.

The bottom line: It's understandable that investors pattern-match, just as it's reasonable for prospective employers to lean on résumés. But there's also a certain amount of intellectual laziness to it, and VCs get paid handsomely to spot the next revolution — as opposed to just replays of the last one.

  • This issue came up in the past few days when Snowflake CEO Frank Slootman said, and then apologized for saying, that while employee diversity is important, it shouldn't "override" merit.
  • Not only was the either/or framing a false choice, but it failed to recognize that pattern-matching (for investing and hiring) has often resulted in homogeneity overriding merit.
  • Katerra's failure should be a warning signal and a wake-up call.

Go deeper

School principals are not OK

Principal Alice Hom (purple jacket) of New York's Yung Wing School P.S. 124 near a vaccination van in November. Photo: Michael Loccisano/Getty Images

The overwhelming majority of secondary school principals experienced frequent stress last school year, according to a RAND Corporation report out Wednesday.

The big picture: The stress levels among female principals and principals of color were especially stark, with nearly 40% in these groups reporting constant job-related stress, compared to about 24% of male principals and 26% of white principals.

It's official: Stock market having worst start to year ever

Data: FactSet; Chart: Axios Visuals

It's been a decidedly ugly start to the year for the stock market, with particular pain in the tech trade.

State of play: As of the end of trading Tuesday — the 16th session of the year — 2022 is now, officially, the worst-ever start in the history of the S&P 500, according to data from Ned Davis Research, a stock market research shop.

Surprising pandemic side effect: Soaring trade deficits

Source: Census Bureau and Bureau of Economic Analysis; Chart: Axios Visuals

Inflation and jobs may get all the economic headlines, but meanwhile a big shift is taking place in the underpinnings of the world economy: The U.S. trade deficit is soaring.

What's happening: Americans' spending on imported physical goods has gone through the roof, while exports are growing slowly, making the U.S. the world's consumer of last resort.