Vertical Aerospace founder and CEO Stephen Fitzpatrick took action this week to reassure markets about the viability of his company, committing up to $50 million in additional equity capital, intended to fund the startup’s activities through the second quarter of 2025.

But will it be enough to arrest Vertical’s precipitous stock price decline? Markets appear to have shrugged off the news; at the time of writing, the Bristol, England-based company’s stock is still trading under $0.65, indicating that investors remain unconvinced whether it has enough financial runway to get to type certification and entry into service, now planned for late 2026.  

Those concerns are well-founded. The cost of type-certifying a clean-sheet electric vertical-takeoff-and-landing (eVTOL) vehicle—a feat that has not been achieved outside China—can cost more than a billion dollars, according to industry experts, and possibly multiple billions in the case of vertically integrated startups like Archer or Joby. That’s a problem for Vertical, which has raised just under $350 million to date, while Archer has raised over $1 billion and Joby more than $2 billion, according to data from SMG Consulting.

Vertical partially compensates for its weaker balance sheet with a lean business model that allows it to keep a lid on headcount and spending levels by relying heavily on its Tier One aerospace suppliers, in contrast to its more vertically integrated rivals. As a result, it has been able to spend at a relatively restrained pace, spending an estimated £90 million ($114 million) in 2023 and projecting to spend around £80 million in 2024. By comparison, Archer spent around $180 million in the first three quarters of 2023, while Joby spent $253 million.  

Unsurprisingly, there are serious questions about whether the low level of spending projected by Vertical will prove sufficient as flight testing ramps up and certification draws nearer. Speaking to Aviation Daily recently, Archer co-founder and CEO Adam Goldstein appeared to cast doubts on the viability of Vertical’s spending plan, although he did not specifically name the company.

“Look at what Archer and Joby are spending and then compare it to some of the other groups,” Goldstein says. “The sad truth is you can’t certify a plane on a $100 million a year budget. That’s just not real. When you’re doing certification programs and flight testing, it’s very expensive. That’s what separates the companies in this space; most do not actually have the capital to build a certified plane.”

Sergio Cecutta, president of SMG Consulting, is also puzzled regarding how Vertical intends to certify its vehicle while spending just a fraction of what its competitors have spent—particularly as the company’s flight testing ramps up.  

“Their testing tempo is going to increase,” Cecutta says. “They need to do more work toward conforming aircraft. They’re building prototypes two and three, and they want to do flight demonstrations at Farnborough and other places. So, I would think the spending should be higher in 2024 than it was in 2023.”

“Joby and Archer are spending $200-300 million a year,” he adds. “Even with Vertical not having much vertical integration, can they continue at $100 million a year? I don’t see how that can be done.”

Vertical, for its part, insists that the $50 million equity investment will be enough to fund its operations through to the second quarter of 2025. Additionally, the company said it plans to raise more capital to supplement Fitzpatrick’s latest investment, pending positive developments related to its flight-test campaign, which is expected to begin in early 2024.

Progress demonstrated with its upcoming prototypes could allow Vertical to raise at a higher valuation, according to a research note from Canaccord Genuity analyst Austin Moeller, who also writes that predelivery payments could bring in additional cash. But some observers view Fitzpatrick’s decision to personally inject more of his own cash into the company as an indication that investment dollars remain scarce.

“It’s a reflection of the toughness of the times,” Cecutta says. “There is a lot of economic uncertainty around the world in 2024, and that’s not great for Vertical if it’s going to have to raise more money.”

To be sure, Vertical does have some key advantages, including a large conditional orderbook (1,500 units), a partnership with key customers like American Airlines, and an impressive roster of Tier One legacy aerospace suppliers.

Whether those strengths will be enough to overcome Vertical’s financial problems remains to be seen. But taken together with its strong technological foundation, there exists a strong value proposition that could make the startup a compelling candidate for a potential acquisition—if and when it ultimately does run out of cash.