Cash-Strapped Startups Pivot To Subscale Cargo Drones

The advanced air mobility industry has endured a tough couple of years during which capital markets have mostly dried up for all but the most bullish market leaders like Archer Aviation, Beta Technologies and Joby Aviation.

For the large cohort of smaller, lesser-capitalized startups that plan to go to market later this decade, the cash spigots mostly have been shut off. That has forced a growing number of companies to reorient their focus from developing passenger-carrying electric vertical-takeoff-and-landing (eVTOL) air taxis to smaller, uncrewed aircraft intended for nonpassenger mission sets, including cargo, logistics, inspections and emergency medical services, among other use cases.

• eVTOL developers heed customer and funder feedback
• Remote cargo drones offer easier path to service entry and revenue

The motivations are clear. Companies say they can develop an uncrewed aircraft for a fraction of the cost of a piloted version that would require expensive cockpits and avionics and the completion of a rigorous certification process. Many are using subscale, remote demonstrators to validate their larger, piloted aircraft, so the decision to switch course requires little or no added development work.

Going remote also allows startups to bypass the costly and time-consuming type certification process. In Europe, civil drones can be operated under the European Union Aviation Safety Agency’s risk-based Specific Assurance and Integrity Level rules, while U.S. waivers and permits can allow companies to perform certain nonpassenger missions.

Moreover, since subscale demonstrators often share most of the same design as their full-scale counterparts, development work can be leveraged toward eventual certification of the more ambitious passenger versions.

A prominent example of this trend is Odys Aviation, a California-based startup that originally planned to go to market with a nine-passenger hybrid eVTOL called the Alta. But the company announced a pivot this year to pursue an uncrewed, subscale version called the Laila. The smaller drone was initially conceived as a demonstrator for the Alta, but customers who came to view the aircraft surprised the company by expressing interest in purchasing the remote demonstrator.

Initially, Odys approached the idea with skepticism, says co-founder and CEO James Dorris. He says he still harbors misgivings about the potential size of the market for middle-mile logistics using eVTOLs. But when taking a more expansive view of applications for the drone, which can carry a 130-kg (286-lb.) payload over a 450-mi. range, he says there is probably enough opportunity to justify going to market first with the cheaper and lower-risk aircraft.

“If you can build a small eVTOL drone in a way so that it is sufficiently multimission-capable—things like cargo, logistics, surveillance, pipeline inspections or defense—that opens up a big enough aggregate market where the business case start to make sense,” Dorris says.

Swiss-based Dufour Aerospace followed a similar path. Initially focused on the eight-passenger, hybrid-electric Aero3 tiltwing eVTOL, Dufour shifted focus this year to concentrate on the Aero2, which had been conceived as an uncrewed, subscale demonstrator for the Aero3.

“The Aero2 was originally just a demonstrator that we built to better understand the tiltwing aircraft—its aerodynamics, physics, propulsion and control,” Dufour founder and CEO Thomas Pfammatter says. “What we did not expect was the positive feedback we heard from customers who started asking: ‘Actually, can we buy this aircraft?’ That made us realize that it would make sense to start with this as a product.”

Another example is Canadian startup Jaunt Air Mobility, which is developing an eVTOL gyrodyne called Journey. The company last year announced a decision to use a 1/4-scale drone as a standalone product. The company had never intended to commercialize the small drone, “but now we see an opportunity to offer something that can be a unique solution for the drone market, in addition to the full-size aircraft,” Jaunt’s President Eric Cote told Aviation Week in late 2023.

“A lot of things we are developing on this smaller version will be up-scalable to the full-size aircraft, because they are fundamentally the same exact configuration,” Cote said.  “We see it as something that will be great for beyond-visual-line-of-sight flying, particularly for missions related to cargo or logistics, because in many ways it is more capable than what other drones are offering.”

The shift to uncrewed applications is also evident at developers of ultralight eVTOLs intended for personal and recreational use. For example, both U.S.-Israeli startup Air and UK startup Skyfly are developing cargo versions of their piloted, two-seat eVTOLs, and U.S. startups Lift Aircraft and Pivotal are both developing cargo versions of their single-seat recreational aircraft.

Rani Plaut, co-founder and CEO of Air, which is developing a winged multicopter called the One, says the decision to pursue an uncrewed cargo version required very little additional development work, as the company has been flight-testing a full-scale, uncrewed demonstrator from the outset. Like Dorris from Odys, Plaut says he was initially skeptical of the cargo use case, but upon closer examination he became convinced there is a market for small eVTOL drones.

“In many geographies, we can go and operate unmanned cargo applications today, as long as we stay away from urban areas and don’t get too close to people,” Plaut says. “We can also get some very swift experimental certifications so we can start earning revenue much quicker. Also, since we are clocking hours with this platform, it helps us develop and refine the passenger version because the two aircraft are basically identical.”

Plaut also says he sees the burgeoning market for uncrewed cargo solutions as “low-hanging fruit” to generate revenue and scale up production ahead of the first passenger deliveries. 

“It’s a win-win situation all around,” Plaut says. “We get our feet wet in terms of operating aircraft, which simplifies our certification path; the industry wins by getting these things in the air; and the customer gains by being a frontrunner in a fast-growing industry.”

To be sure, the market opportunity for small eVTOL aircraft flying middle-mile cargo missions, as well as other applications typically performed by helicopters like search-and-rescue or casualty evacuation, remains a matter of debate. The proliferation of startups chasing the same untested market suggests that many will ultimately fail.

But as capital remains tight amid growing doubts about the viability of urban air mobility, more eVTOL startups could switch course.

Editor's Note: This article was updated to include additional comments from advanced air mobility startup executives.