twelve years ago, Joby Aviation consisted of a team of seven engineers working out of founder Joben Bewart’s farm in the Santa Cruz Mountains. Today, the startup has grown to 800 people and a valuation of $6.6 billion, ranking itself as the most valuable electric vertical take-off and landing (eVTOL) company in the industry.
Like any disruptive industry, the forecast may be more hazy than the rosy picture painted by passionate founders and investors.
It is not the only air taxi company to have achieved 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 growing, and the CEO has promised commercialization by early 2024.
Like any disruptive industry, the forecast may be more hazy than the rosy picture painted by passionate founders and investors. A quick look at the comments and posts on LinkedIn reveals the controversy among industry insiders and analysts over when this emerging technology will actually debut and which companies will come next.
Other disagreements have higher stakes. Visk Aero filed suit against Archer Aviation alleging trade secret misappropriation. Meanwhile, valuations for companies that have no revenue yet — and not for the foreseeable future — are skyrocketing.
Electric air mobility is gaining altitude. But there is going to be some upheaval ahead.
Big goals and big expenses
Taking EVTOL from design to manufacturing and certification will likely cost about $1 billion, Mark Moore, then-chief of Uber Elevate, estimated during a conference hosted by the Air Force’s Agility Prime program in April 2020.
This means that in some sense, the companies that will come out on top will probably be the ones that have managed to raise enough money to pay for all the expenses associated with engineering, certification, construction and infrastructure.
Asad Hussain, a senior analyst at Mobility, said, “Startups that have successfully raised or will be able to raise a significant amount of capital to get them through the certification process… that is the number one thing that separates the strong from the weak going to separate.” technology at Pitchbook, told Nerdshala. “There are over 100 startups in space. Not all of them will be able to do that.”
Consider some of the largest EVTOL spends accrued last year: Joby Aviation spent $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 any products to market yet. Operating expenses are only likely to increase in the future as companies enter the manufacturing and deployment phases.
This means two things for the future of the industry: more SPAC deals and more acquisitions.
Mobility companies, including those working on electrified transportation, are often pre-revenue and have very capital-cap business models — a combination that can make finding buyers in traditional IPOs difficult. SPACs have become increasingly popular as a smaller, less expensive way to become a public company. SPAC has historically received less scrutiny than an IPO. Hussein said that if the US Securities Exchange Commission starts taking a closer look at future SPAC mergers, it could reduce the ability of other air taxi companies to go public in this manner.
This means that market consolidation is almost guaranteed, as smaller companies may be more profitable to sell than to raise more capital. It’s already started: In late 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 would find the buy or sell route to be 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 through a merger with Broadstone Acquisition Corp at an equity value of about $2.2 billion.