Twelve years agoJoby Aviation consisted of a team of seven engineers working on founder JoeBen Bevirt’s ranch in the Santa Cruz Mountains. Today, the startup has 800 people and a valuation of $ 6.6 billion, ranking as the most valued electric vertical take-off and landing (eVTOL) company in the industry.
As in any disruptive industry, the forecast can be more cloudy than the rosy picture painted by passionate founders and investors.
It’s not the only air taxi company to achieve unicorn status. The domain is now dotted with new companies or those soon to be publicly traded thanks to mergers and specialized acquisition companies. Partnerships with major automakers and airlines are increasing, and CEOs have promised commercialization as early as 2024.
As in any disruptive industry, the forecast can be more cloudy than the rosy picture painted by passionate founders and investors. A quick glance at the comments and posts on LinkedIn reveals bickering among insiders and industry analysts about when this emerging technology will really take off and which companies will prevail.
Other disagreements have higher stakes. Wisk Aero has filed a complaint against Archer Aviation alleging trade secret misappropriation. Meanwhile, the valuations of companies that do not yet have revenue to speak of – and perhaps not in the foreseeable future – are skyrocketing.
Electric air mobility is gaining height. But there is going to be some turbulence ahead.
Big goals and bigger expenses
Taking an eVTOL from design to manufacturing and certification will likely cost around $ 1 billion, said Mark Moore, then director of Uber Elevate, in April 2020 at a conference hosted by the Agility Prime program of the ‘Air Force.
This means that, in a sense, the companies that come out on top are likely to be the ones that have managed to raise enough money to pay for all the expenses associated with engineering, certification, manufacturing and infrastructure. .
“Startups that have succeeded in raising or will be able to raise significant capital to get them through the certification process … this is the first thing that will separate the strong from the weak”, Asad Hussain, senior analyst in mobility technology at PitchBook, TechCrunch said. “There are over 100 startups in space. Not all will be able to do this. “
Just consider some of the spending racked up by the biggest eVTOLs last year: Joby Aviation spent $ 108 million on research and development, an increase of $ 30 million from 2019. Archer spent $ 21 million on R&D in 2020, according to regulatory documents. Meanwhile, Joby’s net loss last year was $ 114.2 million and Archer’s was $ 24.8 million, although, of course, neither company has put any money in yet. product in the market. Operating expenses are likely to continue to grow in the future as companies enter the manufacturing and deployment phases.
What this means for the future of the industry is probably two things: more PSPC deals and more acquisitions.
Mobility companies, including those working on electrified transportation, are often pre-income and have capital-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 and cheaper path to becoming a public company. SPACs have also historically been less scrutinized than IPOs. If the United States Securities Exchange Commission begins to take a closer look at PSPC mergers in the future, it could hamper the ability of other air taxi companies to go public in this way, Hussain said.
This means that market consolidation is almost guaranteed, as small businesses may find it more beneficial to sell than to keep raising more capital. It’s already started: at the end of April, eVTOL developer Astro Aerospace announced the acquisition of Horizon Aircraft.
Horizon cited “improved access to capital” as one of the many benefits of the transaction, and other companies are likely to find the most advantageous buying or selling route on the commercialization route. And just last week Britain’s eVTOL Vertical Aerospace, which has an order for 150 planes from Virgin Atlantic, announced it would go public through a merger with Broadstone Acquisition Corp. at a net worth of approximately $ 2.2 billion.