The financial data and software company PitchBook predicts that eVTOL air taxi startups will receive a record level of venture capital (VC) investment in 2020.
The prediction is contained within PitchBook’s “2020 Emerging Technology Outlook,” released in early December. The report provides predictions for trends in mobility, including outlooks for air taxi and autonomous vehicle startups. According to the report, positive previous investment trends could signal further growth in 2020.
Because of the potential of eVTOL air taxis to dramatically lower the cost of urban transportation while reducing emissions and traffic congestion, air taxi startups are primed for nontraditional venture investors, PitchBook says. In fact, the company believes that the urban air mobility space has the potential to take over a large segment of market share from both ground-based transportation services and the helicopter industry.
According to the report, “these industries combined represent a massive market of approximately $1.1 trillion in annual spending. Even assuming a small share of this market could represent substantial returns for early investors.” PitchBook predicts that in the early phase of adoption, electric air taxis will primarily displace helicopter services because of the lower operating and maintenance costs of eVTOL aircraft compared to helicopters.
However, PitchBook is skeptical that most eVTOL developers will be able to meet their targets for deployment in the mid-2020s, due to the significant technological and regulatory barriers associated with this potentially disruptive industry. According to PitchBook, the cost of developing and certifying a new light aircraft can reach $1 billion or higher, but only $438 million total VC has been invested in the space since 2009.
“Most air taxi startups [have] little revenue and rapid burn rates,” Pitchbook’s report points out. It adds, however, that nontraditional investors including including auto manufacturers and corporates such as Intel Capital could help address these cash demands to some extent, as “these companies can afford to invest large amounts of capital over a lengthier time horizon than the comfort zones of most conventional VCs.”
As of the report’s release date, $68.4 million in VC had been invested in electric air taxi startups in 2019, according to PitchBook. That represents a decline from the record $138.7 million invested in 2017 and the $128.5 million in 2018, although those higher numbers were largely driven by $90 and $100 million Series B investments in Lilium and Joby Aviation, respectively. Joby, which has raised a total of $128.3 million to date, and Lilium, which has raised $100.9 million, remain the best capitalized eVTOL startups, with Volocopter close behind at $96.5 million.
While 2019 was a comparatively slow year for eVTOL investment, deal activity picked up in the latter half of the year, the report notes, highlighting recent investments in Volocopter and the Karem Aircraft subsidiary Overair.
Moreover, the report states, “We believe Joby Aviation and Lilium are good candidates for mega-deals in the next 12 months. Notably, Lilium is reportedly seeking $500 million in an upcoming Series C round from Tencent and other investors. Such a scenario could result in 2020 being a record year for VC investment in the air taxi space.”