Jon Hamilton, a longtime construction worker, got a job last year leading a small crew building a custom home near San Antonio, Texas. His employer, Katerra, was one of the most well-funded startups in Silicon Valley. The tech-oriented construction company has raised more than $1 billion from major investors including SoftBank, Foxconn and DFJ.

But Mr. Hamilton could soon tell something was off. Laborers hired by Katerra were unskilled. Floor panels manufactured in Katerra’s Phoenix factory were the wrong size when they arrived at the Texas job site to be assembled. The house was slated to be finished in February, but was completed only last month—and by that time he had been laid off, said Mr. Hamilton. “It was behind schedule. It stayed behind schedule,” he said.