The Russian war in Ukraine and President Donald Trump’s reluctance to support NATO allies have helped fund European defence technology. Also, across the industry, startups are taking advantage of opportunities.
One such company is the UK-based startup Vertical Aerospace, which develops EVTOL (electric vertical takeoff and landing) aircraft, primarily for air taxi operations. The startup has over 1,500 pre-orders for VX4 EVTOL from customers such as American Airlines, Japan Airlines, GOL, and Bristow.
Now, Vertical is talking more publicly about defense and logistics opportunities. On Monday, Vertical took its first public step by announcing its plans to develop a hybrid electrical variant of VX4.
“We’ve always known that this aircraft would respond to defense because of its nature,” Vertical Aerospace CEO Stuart Simpson told TechCrunch, promising that the hybrid version of EVTOL ranges up to 1,000 miles. This is a 10-fold increase in EVTOL.
The VTOL makes it a great defense aircraft due to its low noise and low heat signature. It can also be deployed autonomously or remotely, and functional capabilities say the aircraft will have one day. Vertical is partnering with Honeywell, which develops autonomous aircraft for the US military, to create flight control and aircraft management systems for vehicles.
Vertical’s hybrid electrical strategy is not specific to startups. In December 2024, California-based Archer Aviation, in collaboration with arms maker Anduril, announced a new unit dedicated to defense along with plans to build hybrid electric aircraft for critical military missions. The news has led Archer to acquire an additional $430 million in stake from existing investors.
And Simpson claims that verticals haven’t come out of hybrid vehicle news from opportunistic — the startup has been working on stealth hybrid aircraft for 18 months — that’s certainly a good time.
The landscape of European defence technology has changed over the past few years as blocks prioritize homemade solutions. Last year, $1 billion venture capital was invested in the industry for the first time. This has been five times more since 2018. Expert Defense Technology Funds have also been born, including the 10 billion euro NATO Innovation Fund and the Estonian SmartCap €100 million euro Defense Fund. Lithuania is ready to spend 5% to 6% of total GDP on defense spending, including startups via Sovereign VC Coinvest Capital.
Contrary to this background, vertical essentially finds itself without European rivals in the EVTOL industry. At the end of 2024, German Borocopter filed for bankruptcy and Lilium halted the operation. Vertical said this is setting itself apart to meet growing defensive needs across Europe. And now, with the future hybrid electrical capabilities, it could become a key player amid growing defense budgets and increasing concentration on sovereign industry capabilities.
However, to properly seize the moment, the vertical will likely need to raise more capital. According to Pitchbook, the startup has raised $468.8 million so far, primarily through its 2021 reverse merger and subsequent pipelines (private investment in public capital). Most recently, in January, Vertical raised $90 million through its second direct offer.
This is far below competitors Joby Aviation (stopped $2.82 billion), Archer Aviation (stopped $3.36 billion), and Beta Technology (stopped $1.15 billion).
“We’ve spent about $100 million a year,” Simpson said. “Our competitors have spent between $400 (million) and $500 million. We’re developing this hybrid within a $100 million spending envelope. We’re very efficient and concentrated.”
Archer’s operating expenses tops $500 million in 2024, with chunks directed towards resolving the dispute between Boeing and Wysquarero. Last year, Joby’s operating expenses reached nearly $600 million.
That said, both Archer and Joby have invested heavily in manufacturing, making it possible to produce EVTOL on a large scale right away. Simpson said Vertical has not yet worked to step up manufacturing before completing the certification, but this is expected to be completed in 2028.
“By building and getting lots of robots, you can burn a lot of money,” Simpson said. “This is not what you want to robotize. These are very complicated, very complicated. All you need to do is understand how to build them, and you manually build hundreds of them. Then you simplify, standardize, automate.”
Vertical aims to build the first pre-certified prototype of the VX4 EVTOL next year, with plans to build a handful afterwards.
“The hybrid powertrain will be integrated into the next generation VX4 variant in flight tests scheduled to begin next year,” Simpson said Tuesday in Betical’s first quarter revenue call.
Vertical flight testing is only conducted on pilots as it is part of the stricter nature of UK flight regulations. Joby and Beta are already on pilot flights, but Archer isn’t yet, but they’re going to avoid that and do so.
The company has not yet secured its military offering customers for Vertical.
“There was a lot of deep and meaningful discussions with government agencies and customers,” Simpson said. “But we are the only European player in this space, so that gives us a truly unique position.”