Lilium is reportedly looking to raise $400 to 500 million, almost a five-fold increase in the amount other air taxi developers have raised to date. (Photo: Lilium)
The Munich, Germany-based air taxi developer Lilium is reportedly seeking to raise between $400 and $500 million, according to TechCrunch’s Ingrid Lunden.
This would mark a step increase in the amount of capital any air taxi developer has raised thus far. Lilium, Volocopter, Joby Aviation and a few others have reportedly raised roughly $100 million to date, but the cost of developing and certifying a new aircraft — even smaller aircraft, like most air taxi designs — is often estimated at $1 billion or more.
In May of this year, Lilium’s five-seat, vectored-thrust electric vertical takeoff and landing (eVTOL) aircraft, equipped with 36 electric fans, took flight for the first time. The company had previously developed and flown a two-seat version of the design.
"We're glad the world is getting as excited as we are about flying taxis, but we don’t recognize these numbers and we don’t comment on speculation regarding fundraising activities,” a representative for Lilium told Avionics International. “Today our focus is squarely on putting the Lilium Jet through its paces on the airfield.”
In contrast with many other air taxi developers, Lilium isn’t focused on short, intra-urban hops. Co-founder and CEO Daniel Wiegand told eVTOL.com his company is instead choosing to pursue regional air mobility, via flights between cities or from the city to the countryside, where he sees more potential time-savings — and therefore value — for passengers who might otherwise take a car or commercial aircraft. Lilium’s performance targets are a 186-mile range at 186 miles per hour.
“[$400 to 500 million] would probably get them a big part of the way there,” Richard Aboulafia, vice president at the Teal Group told Avionics International. “But my issue really is about the capital providers. Where is this supposed to come from? The scale of capital needed by aerospace companies is an order of magnitude different from what the Silicon Valley crowd is used to.”
To date, Lilium has raised just over $100 million from Freigeist Capital, Atomico, LGT Capital Partners, Obvious Ventures and Tencent, according to Crunchbase.
Some of these investors fit Aboulafia’s description of “Silicon Valley” venture capital firms with a background in software. Frank Thelen, the founder of Freigeist — which participated in Lilium’s 2015 seed funding round and its $11.4 million Series A — later wrote, in a 2017 Medium blog post explaining the investment, that he knew “even if we wrote our biggest check ever, it would only last for 6–9 months.”
But a few of the investors in Lilium may have an appetite for the type of capital the firm is reportedly looking for. Tencent Holdings, which led Lilium’s Series B, is a Chinese internet giant with almost $50 billion in annual revenue. It has made numerous eight- and nine-figure investments in companies such as Uber, Tesla Motors, Lyft, Riot Games and more.
There aren’t many types of investment groups willing to invest nine-figure amounts in unproven aerospace products, a challenge many air taxi companies will soon face on their path to certification. Speaking at Revolution.Aero in September, Kirsten Bartok, managing parter at AirFinance, said most venture capital firms won’t invest more than $5 to $15 million in a single deal, aside from the largest players like Sequoia, Index and Bessemer. To raise amounts like what Lilium is reportedly seeking, companies may look toward private equity groups, but they are unlikely to stomach the risk and return timelines endemic to aircraft development.
“They target investments with no market risk or product risk,” Bartok said. “They take execution risk, so when a company is ready to scale and their product is out there in the market and now all they need to do is scale and ramp up operations — that’s where growth equity comes in.”
“So possibly, after a VTOL is certified and has its production certificate and is ready to start operations, that would be an appropriate place for growth equity to come in. But not likely before that.”
And Lilium may need even more up-front investment than the cost of certifying and producing its aircraft, as it plans to be both the aircraft manufacturer and the operator/platform, investing heavily in software engineers to build out fleet management software and a customer-facing mobile phone app for booking. Bartok estimated companies with similar “full-stack” aspirations will need another $100-300 million in venture capital.
One urban air mobility executive told Avionics International they had been approached by investors speaking with Lilium for due diligence purposes.
"They're people who write big checks, so that number sounds about right," the executive said, confirming that — to their knowledge — Lilium is presenting investors with plans to both build and operate its jet.
"It's very difficult to build the vehicle and the platform, it’s two different types of competencies, two different types of companies," the executive added, skeptical of Lilium's approach. "It's more about time than the money ... you have to be able to focus."
One answer to the funding question: high net-worth individuals with pet interests in aerospace. Google co-founder Larry Page has funded the development of multiple air taxi companies, including Zee Aero — now part of Kitty Hawk, which recently unveiled its Heaviside aircraft — and Opener, which is developing personal aircraft BlackFly.
Zee Aero was reportedly founded on a $100 million investment from Page, but industry sources speculate he has invested much more than that in his various eVTOL companies.
More than 200 VTOL concepts are under development worldwide, though a few dozen have likely received seed funding. As companies look to move past the initial development stage and gain regulatory approval for their aircraft — exactly what Lilium is reportedly doing — the list of designs actively under development will likely undergo a culling.
“This is the kind of money that has typically been needed to bring a new rotorcraft to certification,” Mike Hirschberg, executive director of the Vertical Flight Society, told Avionics, referring to Lilium’s reported fundraising activities. “But that’s just for certification, not building a fleet, and not capitalizing infrastructure or operating them. So, $400-500M is a good start, but it may not be enough to make a profit — or even to start earning revenue.”
“That is the chasm that will separate the winners from the dreamers — deep pockets.”
This article has been updated with additional comments on Lilium's fundraising activities.