Twelve years ago, Joby Aviation consisted of a team of seven engineers working out of founder JoeBen Bevirt’s ranch in the Santa Cruz mountains. Today, the startup has swelled to 800 people and a $6.6 billion valuation, ranking itself as the highest-valued electric vertical take-off and landing (eVTOL) company in the industry.
As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors.
It’s not the only air taxi company to reach unicorn status. The field is now dotted with new or soon-to-be publicly traded companies courtesy of mergers and special purpose acquisition companies. Partnerships with major automakers and airlines are on the rise, and CEOs have promised commercialization as early as 2024.
As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors. A quick peek at comments and posts on LinkedIn reveals squabbles among industry insiders and analysts about when this emerging technology will truly take off and which companies will come out ahead.
Other disagreements have higher stakes. Wisk Aero filed a lawsuit against Archer Aviation alleging trade secret misappropriation. Meanwhile, valuations for companies that have no revenue yet to speak of — and may not for the foreseeable future — are skyrocketing.
Electric air mobility is gaining elevation. But there’s going to be some turbulence ahead.
Big goals and bigger expenses
Taking an eVTOL from design through to manufacturing and certification will likely cost about $1 billion, Mark Moore, then-head of Uber Elevate, estimated in April 2020 during a conference held by the Air Force’s Agility Prime program.
That means in some sense, the companies that will come out on top will likely be the ones that have managed to raise enough money to pay for all the expenses associated with engineering, certification, manufacturing and infrastructure.
“The startups that have successfully raised or that will be able to raise significant amounts of capital to get them through the certification process … that’s the number one thing that’s going to separate the strong from the weak,” Asad Hussain, a senior analyst in mobility technology at PitchBook, told TechCrunch. “There’s over 100 startups in the space. Not all of them are going to be able to do that.”
Just consider some of the expenses accrued by the biggest eVTOLs last year: Joby Aviation spent a whopping $108 million on research and development, a $30 million increase from 2019. Archer spent $21 million in R&D in 2020, according to regulatory filings. Meanwhile, Joby’s net loss last year was $114.2 million and Archer’s was $24.8 million, though, of course, neither company has brought a product to market yet. Operating expenses will likely only continue to grow into the future as companies enter into manufacturing and deployment phases.
What that means for the future of the industry is likely two things: more SPAC deals and more acquisitions.
Mobility companies, including those working on electrified transport, are often pre-revenue and have capitally intensive business models — a combination that can make it difficult to find buyers in a traditional IPO. SPACs have become increasingly popular as a shorter, less expensive path to becoming a public company. SPACs have also historically received less scrutiny than IPOs. Should the U.S. Securities Exchange Commission start to take a closer look at SPAC mergers in the future, it may impair the ability of other air taxi companies to go public this way, Hussain said.
That means market consolidation is nearly guaranteed, as smaller companies may find it more advantageous to sell than continue to raise more capital. It’s already begun: At the end of April, eVTOL developer Astro Aerospace announced the acquisition of Horizon Aircraft.
Horizon cited “greater access to capital” as one of the many benefits of the transaction, and other companies will likely find the buy or sell route to be the most beneficial on the road to commercialization. And just last week, British eVTOL Vertical Aerospace, which has an order for 150 aircraft from Virgin Atlantic, said it would go public via a merger with Broadstone Acquisition Corp. at an equity value of around $2.2 billion.
Raising a lot of cash isn’t the only indicator of success. But other indicators may be as fraught as they are promising.
Follow the money
It’s clear that the eVTOL industry is capital-intensive, but funding is only one piece of the puzzle. Investors are also looking out for which companies are making good time with flight certification and which are landing deals with established transportation and logistics veterans. These deals, such as Vermont-based Beta Technologies’ announcement in April that it would provide UPS with up to 150 eVTOL vehicles for time-sensitive deliveries, are good indicators of a competitive project.
Automakers and traditional aerospace companies have started investing in air taxi startups, which could give companies a significant boost by providing expertise in scaled manufacturing and components. Bevirt told investors in April that Toyota, one of Joby’s main investors, was working “shoulder to shoulder” with Joby’s team. Volocopter, a German eVTOL startup, has received investments from Daimler and Chinese automaker Geely.
Michael Pye, an investment manager for The Baillie Gifford U.S. Equities Fund, told TechCrunch that when deciding to invest in Lilium and Joby, the firm also looked for certain founder- and management-level attributes, such as long-term thinking and aeronautical engineering expertise.
“We’re very interested in management teams that have this very long time frame,” Pye said. “In the case of Daniel [Wiegand] at Lilium, I remember vividly my colleague and I asked him, ‘Could this be something you could sell to private individuals?’ He was absolutely adamant; he said absolutely no way. Lilium’s mission is to make electric flights ubiquitous.”
Partnerships are not without their risks. Archer — one of three eVTOL companies that announced an intention to go public via SPAC merger, along with Joby and Lilium — made headlines when it landed a $1 billion order from United Airlines. However, Archer said in a filing with the SEC that the purchase agreement constituted all the current orders for its aircraft and that it was “subject to conditions, further negotiation and reaching mutual agreement on certain material terms.”
But what about the infrastructure?
Once the craft is built and certified, there must be convenient and accessible takeoff and landing vertiports available so that customers can actually access the service. It’s hard to overstate how crucial this piece will be for the overall success of the aerial ride-sharing market, and companies are only just starting to break their silence on how they will solve this problem. Some of this silence is undoubtedly due to the highly competitive nature of the industry, but in order to reach proposed deployment timelines, eVTOL companies (or external developers) will have a lot of infrastructure work to do in the short and long term.
“When you see these ambitious targets of being a kind of mass mobility system and being able to fly tremendous numbers of these aircraft, [it’s] sophisticated, both air management and design of the actual vertiport itself, to be able to facilitate large numbers of these aircraft,” David Wyatt, an analyst with IDTechEx and author of a recent report on air taxis, told TechCrunch.
Archer co-founders Brett Adcock and Adam Goldstein have said they’re open to using existing infrastructure, like helipads and parking garages, in the short term after they launch commercial service in Los Angeles and Miami in 2024. An Archer spokesperson told TechCrunch that the company is “actively engaged with public and private partners” in planning its aerial ecosystem, but what that will look like remains to be seen. Lilium in April publicly released proposed vertiport designs “to help make vertiports accessible to developers large and small,” giving the public some sense of what to expect.
Joby Aviation recently broke its silence on vertiports with the announcement that it was partnering with one of the country’s largest parking garage operators to build out its network of vertiports. And earlier this year, Joby’s head of air operations, Bonny Simi said that “[Joby] will be on the Uber app” in addition to a separate Joby app. It’s a smart move if they can pull off exclusivity, and one that would likely give the company a significant leg up from its competitors.
Flight forecast
If you ask the eVTOL companies that have released forward projections, the future is bright. Archer said by 2026 it expects annual revenue of $2.2 billion, and Joby has made similar estimates.
But everything depends on the timeline to commercial operations. Here, there is major disagreement. Wyatt suggested while the technology is there, consumers may not see air taxis ferrying them around until the next decade. It wouldn’t be a surprise to see a “timeline reset on the horizon,” Hussein said, noting in his recent report on air taxis that investors may underestimate the technological and regulatory complexities of mass adoption.
Morgan Stanley Research has likewise urged investors to temper their excitement, noting in a May 2021 research paper that “regulatory requirements for aviation is one of the most underestimated risks.”
Some air taxi developers have been more forthright with their predictions. Joby Aviation and Archer have stated their goals for a commercial launch in 2024, and Lilium said it aims to bring to market its service as early as 2025. For his part, Moore, who joined Archer’s advisory board, sees these tighter time frames as perfectly plausible. “I have high confidence that at least some aircraft will be certified and in production by 2024,” he said. “That’s very realistic.”
Regardless, many investors are in it for the long haul.
“Ultimately, this industry, changing something like aviation, it’s going to take a long time and it’s going to be very hard. It requires long-term backers, which is something we’d hope to provide,” Pye said.