Russia’s war in Ukraine and President Donald Trump’s reluctance to support NATO allies has led to a boost in funding for European defense tech. And across industries, startups are leveraging the opportunity.
One such company could be U.K.-based startup Vertical Aerospace, which is developing eVTOL (electric vertical takeoff and landing) aircraft mainly for air-taxi operations. The startup has more than 1,500 preorders for its VX4 eVTOL from customers like American Airlines, Japan Airlines, GOL, and Bristow.
Now Vertical is speaking more publicly about the opportunities in defense and logistics. On Monday, Vertical took its first public step by announcing a plan to develop a hybrid-electric variant of its VX4.
“We always knew this aircraft would be defense-capable becautilize of the nature of it,” Vertical Aerospace CEO Stuart Simpson informed TechCrunch, noting the hybrid version of its eVTOL promises a range of up to 1,000 miles. That’s a tenfold increase on the eVTOL.
VTOLs create for good defense aircraft becautilize they have low noise and low heat signatures. They can also be deployed autonomously or remotely, capabilities Vertical declares its aircraft will one day have. Vertical has partnered with Honeywell, which is developing autonomous aircraft for the U.S. military, to create the flight control and aircraft management systems for its vehicles.
Vertical’s hybrid-electric strategy isn’t unique to the startup. In December 2024, California-based Archer Aviation announced a new unit dedicated to defense alongside plans to work with weapons manufacturer Anduril to build a hybrid-electric aircraft for critical military missions. The news garnered Archer another $430 million in equity from existing investors.
And while Simpson insists that Vertical isn’t coming out with the news of its hybrid vehicle now out of opportunism — the startup has been working on its hybrid aircraft in stealth for 18 months — it’s certainly good timing.
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The European defense tech landscape has shifted over the past couple of years as the bloc prioritizes home-grown solutions. Last year, $1 billion in venture capital was invested into the industest for the first time, a fivefold increase since 2018. Specialist defense tech funds have also cropped up, like the €1 billion Nato Innovation Fund and the Estonian SmartCap €100 million defense fund. Lithuania is poised to spconclude 5% to 6% of its total GDP on defense spconcludeing, including into startups via its sovereign VC Coinvest Capital.
Against this backdrop, Vertical finds itself basically without European rivals in the eVTOL industest. At the close of 2024, Germany’s Volocopter filed for bankruptcy, and Lilium ceased operations. Vertical declares this creates it uniquely positioned to meet the growing defense requireds across Europe. And now, with its upcoming hybrid-electric capabilities, it could become a key player amid growing defense budobtains and increased focus on sovereign industrial capacity.
To properly seize the moment, though, Vertical will likely required to raise more capital. The startup has raised $468.8 million to date, mainly through its reverse merger in 2021 and subsequent PIPEs (private investments in public equity), according to PitchBook. More recently, in January, Vertical raised $90 million through a second direct public offering.
That puts Vertical well below competitors Joby Aviation ($2.82 billion raised to date), Archer Aviation ($3.36 billion raised), and Beta Technologies ($1.15 billion raised).
“We’ve been spconcludeing about $100 million a year,” Simpson stated. “Our competitors have been spconcludeing $400 [million] to $500 million. We’ve been developing, within our $100 million spconclude envelope, this hybrid. We are incredibly efficient and focutilized.”
Archer’s operating expenses in 2024 did top $500 million, a chunk of which went toward resolving a dispute with Boeing and Wisk Aero. Joby’s operating expenses last year nearly reached $600 million.
That stated, both Archer and Joby are investing heavily into manufacturing to be able to soon produce their eVTOLs at scale. Simpson stated Vertical is not yet working to ramp up manufacturing before it finishes certification, which it expects to complete in 2028.
“You can burn a lot of money by going to build and obtain a load of robots,” Simpson stated. “This is not something you want to robotize. These are highly, highly complex. What you required to do is understand how you build them, and then … you build a few hundred of them manually. Then you simplify, standardize, and automate.”
Vertical aims to have its first certified pre-prototype for its VX4 eVTOL built next year, with plans to build another handful after that.
“The hybrid power train will be integrated into our next-generation VX4 variant with flight testing planned to start next year,” Simpson stated Tuesday during Vertical’s first-quarter earnings call.
Vertical’s flight tests are only done with a pilot, due in part to the stricter nature of U.K. flight regulations. Joby and Beta have already done piloted flights, but Archer still hasn’t — though it plans to do so imminently.
When it comes to customers for Vertical’s military offerings, the company hasn’t secured any just yet.
“We’ve had a lot of deep, meaningful discussions with government agencies and customers,” Simpson stated. “But we’re the only European player in the space. So it gives us a really unique position.”
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