It’s a tough time to raise capital as a startup, markets are fluctuating globally and investors are being very cautious. Now imagine you’re a startup in an extremely competitive market, looking for 100’s of millions worth of investment and your idea is stifled by lack of regulation. Welcome to the world of electric vertical take-off and landing (eVTOLs) aircraft.
During the past six months, this industry has seen two notable insolvency processes from industry leaders in the eVTOL space.
eVTOL insolvencies
First Lilium announced in October, 2024 that it would not be able secure the funding needed to continue their operations. In many other regions, China, Brazil, France, the US and the UK, government grants have been supporting eVTOL companies in addition to private funding. The objective was to gain the support of the German government in addition to private funding.
Our plan was to obtain shareholder investment in a new funding round anchored by a German government backed loan of €100 million,” Lilium CEO Klaus Roewe said. “We had already conditionally secured additional private capital to complement the KfW loan. However, the Budget Committee was unable to agree on the loan and Bavaria couldn’t do it alone.
Without the support of the German government support, the private funding also did not materialise resulting in the company filing for self-administration. The company began working with KPMG on an M&A process and before the end of last year had announced a successful restructuring agreement with Mobile Uplift Corporation GmbH that would allow Lilium to restart their business.
We are very pleased to announce the signing of an investment agreement with a very experienced consortium of investors, which is a major breakthrough” Lilium CEO Klaus Roewe said. “Deal closing at the beginning of January will allow us to restart our business.
According to Flight Global the situation is still not fully resolved as the transfer of funds to Lilium appears to be delayed. I guess we will have to wait and see the way forward for this company.
And then came Volocopter, another German-based eVTOL company that ran out of funding. At the end of December, they also announced the start of provisional insolvency proceedings.
The company needs financing to take the final steps towards market entry. We will endeavor to develop a restructuring concept by the end of February and implement it with investors,
Tobias Wahl, partner, and attorney at Anchor Rechtsanwältegesellschaft mbH
The company remains optimistic that they are an attractive investment opportunity based on their success to date in the market with the development of the aircraft and customers/partners.
Implications to Advanced Air Mobility (AAM)
Both of these companies were recognised as leaders in the development of their aircraft. They both had customer orders in the range of 120 – 150 aircraft across their customer base according to company announcements. So what went wrong?
Bringing a new aircraft to market is expensive! Predictions say that it could cost up to $1b to certify a new eVTOL aircraft. This is a huge amount of funding for a startup to raise and let’s keep in mind the companies mentioned above are startups. There are other competitors in the market who have the backing of big name aircraft vendors.
The first aspect of this is that many players have entered this market coming from different perspectives – personal aircraft, regional aircraft, urban air mobility aircraft. Market consolidation is normal is any new market category. Although it might be surprising that these two companies specifically have struggled, it’s not surprising that there is only so much funding and target customers to go around and the industry will consolidate as it approaches market launch.
Regulation
Another ‘gotcha’. Without regulation in place, this market struggles for forward momentum. Not unlike their smaller drone counterparts. The importance of regulation to ensure safety cannot be overlooked, but the speed at which regulation has moved in the past does not really work with the new technologies and market entrants. Kind of the chicken and egg concept. We need regulation to fly, we need to show we can fly to get customers and funding.
In summary, has this been a challenging period for eVTOL and as a result advanced air mobility – Yes. Will the industry likely continue to consolidate – Yes. Is this the beginning of a death knell for advanced air mobility – absolutely NO. But it might take a little longer than we all hoped and analysts predicted.
