Florian Reuter on "Co-opetition" and who's investing in eVTOLs
As you walked into last week’s Future of Transportation conference in Cologne, on your way to one of the sessions, one exhibit stood out – the prototype Volocopter 2X sitting square in the middle of the lobby.
The eVTOL manufacturer has been making the conference circuit over the last few months, with the company’s CEO and Managing Director Florian Reuter having just returned from Berlin tech conference NOAH18 before setting off for Cologne for the Future of Transportation conference.
Volocopter is one of the biggest names in the air-taxi space right now, having raised more than €30 million through three separate funding rounds and having recently partnered with car manufacturer Daimler and tech hardware manufacturer Intel to promote its eighteen-rotor air taxi.
History of Volocopter
The company was started up by its chief innovation officer and chief software advisor Alexander Zosel and Stephan Wolf. Both men met each other through skateboarding in their teenage years. Stephan developed the first prototype of the Volocopter in 2011 and brought Alexander Zosel on board.
Realising that the initial idea could get off the ground, the two founders went off the radar, building a team and securing an initial €1.2M seed-round funding in December 2013. They brought on the company’s current CEO Florian Reuter, CTO Jan-Hendrik Boelens and CFO Rene Griemens and began developing a fully functional electric multicopter.
The Volocopter VC200 prototype was granted permission to fly in Germany in 2016 and partnered with Dubai city to conduct a demo flight of the aircraft around the city in September last year. Shortly before the company completed a funding round over 25 million Euro which included Intel and brought shareholders like Daimler and Lukasz Gadowski aboard.
The manufacturer has made a name for itself outside of the aviation space, with Volocopter VC200 demonstrations and updates having been covered extensively by mainstream media and tech publications. Most notably, VC200’s first autonomous passenger flight was covered extensively at CES 2018 in January – flying now-former CEO of Intel Brian Krzanich.
After Florian’s talk at the conference, he and I took a seat inside the Volocopter for a quick chat about what financing is available for VTOLs, how attitudes towards the market have changed and the “Co-opetition” between the manufacturers.
Talking to Florian Reuter:
VI: How did you get into the VTOL space?
FL: "Volocopter started up in 2011 after we saw more model drones being sold and used every day. We were fascinated by the ease of use and complete lack of prior knowledge needed to operate these drones. Our initial thought was to take these flight principles and put them towards an aircraft that can transport people.
"We were probably not the only ones having that thought, but not many did something about it. This is what separated Volocopter from others. We were the first to fly an eVTOL with our prototype aircraft built around a yoga ball. That is how it all started."
VI: Have attitudes changed since that flight?
FL: "Absolutely. The entire crew that founded Volocopter didn’t come from the aviation sector, we all came from other industries including the automation industry and software development. We brought all these aspects together and created something new.
"Along the way, people kept saying that we would never have got the vehicle off the ground if we were part of the aviation industry, and that is somewhat true. We probably would have seen all the obstacles on the way and have been put off. I think it has taken this certain naivety to keep the momentum going and to remain motivated despite any new hurdles we came across.
"We always looked at that mountain of work and sliced it into pieces that we could tackle, and we have come a long way with that approach.
"Initially, the reaction was cautious. People have lost fortunes investing in aviation so there was some scepticism in the beginning. However, we had things we could point to prove that we were worth investing in. From the start, we had interest from NASA and the FAA was keen to work with us. This played to our advantage.
"We really needed to convince the broader aviation industry spectators by demonstrating exactly what we were doing. We do not just talk about it. We want to demo and get people interested. Since then, Airbus has announced its plans and Uber has its air-taxi service. And now, cities are listening and are willing to work with us on the infrastructure side. It’s now a very different ball game to how it was.
"People are turning their heads and now think that eVTOLs will in fact have an impact on urban transport, this too, is a big change to how it was seven years ago."
VI: Now that more legacy aviation companies are coming into the space, how are the tech-heads and the legacy companies getting along?
FL: "I have a background with Siemens and I know that it is tricky jumping into a completely new market. There is no data to analyse and companies need big data and a big market to jump into to make a difference on their balance sheet.
"There was a saying at Siemens that a business smaller than a €100 million is a rounding error in the financial statements. It is the innovator’s dilemma: in order to be relevant for legacy companies, you had to be big instantly. All of those elements are really playing to the advantage of small companies.
"People are waking up and seeing the business potential in this market, but I am not scared about them as competition since their reaction times are pretty long. At one time these big companies used to buy out newcomers. But now, with the maturity of the-private-capital markets, we see how easy it is to source venture capital, Uber is a prime example. Today start-ups can get big quickly, so big that they become a major player that can no longer be bought.
"Now we are seeing major interest from these big companies. When they approach us, we need to think of Volocopter and what is best for the company. We made a big decision last year when we decided to team up with a car OEM rather than a traditional aircraft manufacturer driven by the level of production we are hoping to achieve.
"I am convinced that we can benefit from this strategic partnership, more so than if we had partnered with a traditional aircraft manufacturer."
VI: How hard is it to find financing?
FL: "Volocopter has had a large press presence at every stage. Financing for us has been straightforward so far, it has been a typical venture-capital play. Nevertheless, we do not really fit the traditional investment criteria so well.
"At this point in time, we raised around €30 million last summer in series B financing. We are still technically pre-revenue but we still get money by simply exhibiting Volocopter and cooperating with authorities, but that isn’t generating the revenue we are looking for. We still have one phase to go before we can show proper revenues.
"For this, stakes are pretty high already. It is a much more granular process in the tech space but you can still scale fast. The opportunity is huge in our space and we are extremely confident that we will find the right partners for the next stage in financing.
"In that next phase we will complete our commercial certification. Then we will be starting routine operations in at least two cities. We want to accomplish commercialisation, prove the recipe for success and then scale from there."
VI: Who has shown the most interest?
FL: "We have seen a lot of people who want to use the Volocopter from a customer perspective. We were surprised at the amount of interest from cities, especially Dubai – where they demanded we fly autonomous demos from the start. We expected that to take a little longer but we are happy we got to do it.
"This helped really accelerate our efforts after these demos, giving us data to improve the autonomy. Regulators are also supportive -- they have their legitimate questions and it is taking time but we have not run into any obstacles that seem insurmountable, it has been very pragmatic and straightforward.
"Everyone understands that the tech is ready and we need to create the necessary regulatory framework to bring this technology to the broader public. All our stakeholders are extremely supportive, investors obviously play a very important role in our plan.
"Sometimes we are surprised at which investors are interested in this particular field despite it’s not fitting our typical investment programme. What would be typical in our space just does not exist outside of it."
VI: You said you expect the Volocopter to be safer than helicopters, when will we see this?
FL: "We need to get the empirical statistics to prove this point. But I think we can already show by analysis and demonstration. It is uncontested by the regulators we have talked to in depth so far that eVTOLs have the potential to be substantially safer than helicopters.
"But we need to gain enough relevant operational experience to prove our point with the empirical data we collect. But I am not worried by this aspect.
"Also, the theory behind it is simple to understand – should any crucial component fail, the Volocopter can still land safely. This is very different to a helicopter where, when a single crucial part fails, it is a big problem.
"We predict the safety will be substantially better in an eVTOL than a standard helicopter even with unskilled pilots. However, when eVTOLs start flying fully automated, we expect the number of accidents to be even lower."
VI: How willing are people in the VTOL space to share ideas and cooperate?
FL: "I think the word is “Co-opetition”, a mix of cooperation and competition. We are all working towards the same goal and we all need each other to make this industry fly and be as big as we all hope. But at the same time, you do not want to share all your technical ideas with everyone.
"Looking at this space, 90% of all projects we see out there will probably never be competition to us. It is a very limited space for projects that are targeting the same user base and that are looking at a similar configuration to us. Exactly who will be the competition is way too early to tell.
"Where we are competing most right now is in sourcing talent. We are competing for investors to some degree, but I think there is sufficient capital out there. The talent is out there, and they can be approached by everyone. So, a good early sign of where you are in the market is who has swept up the best talent."
VI: Who exactly is investing?
FL: "Right now, we are seeing a lot of interest from strategic investors active in the mobility space. It is an extremely dynamic market and those in the mobility market are all following eVTOLs and getting a feeling for how the market is playing out.
"There were some traditional venture capitalists that were willing to test the water two years ago and they were not that informed on the market. This has completely changed. The venture investors we talk to now all follow the market closely.
"Volocopter is getting to the point where we are outgrowing the need for venture capital rapidly. We are now mainly talking to growth investors. We are seeing a lot of interest from growth investors, which is surprising as they generally want companies to be more-developed before they invest. But they think this opportunity is big enough to step out of their comfort zones and try something new.
"These are the three main camps we are seeing.
VI: Volocopter is also developing a whole air-taxi ecosystem with the Volo-Hubs and Volo-Ports. Are they being developed alongside the aircraft or are they concepts?
FL: "We have probably the most experience operating the vehicle. But now when we engage with cities, we are thinking what we need to do to fly the Volocopter safely and effectively. We sat down with the cities and told what we need from the city to be able to fly the vehicle at scale. It is not enough to just build the vehicle, we might as well wait 10 years and build it when others have figured it out.
"We are not building it all ourselves, we are talking to and partnering with infrastructure developers, charging network suppliers and even next-generation (Air Traffic Management) ATM companies. We are looking to apply a partnership model where we can focus on the manufacturing and operation of the vehicles. But different aspects of the ecosystem are being discussed along the way."
VI: When will we actually see the Volocopter flying?
FL: "We are putting 2021 down as a realistic date. There is the Dubai World Expo in 2020 where everyone in the eVTOL space will be to try and show off something, we are confident that we will have something substantial to show there – we are not sure how close it will be to the real thing, but we think it will be close. For first commercial operation we are looking for 2021.
"When we start operating, we need to have the Volo-Ports in place to take off and land across cities and we will demo them before 2021. Regarding the complete Volo-Hub setup, it depends on the road map, but I still expect it to be early after we start the commercial flights, so we are hoping for 2022.
"We are collecting designs from infrastructure companies for the Volo-Hub now, but it is a side project. The most important things right now are commercially certifying the Volocopter – focusing on our two-seater design initially."
VI:Which regulators are you talking to?
FL: "EASA is home town for us so we are working closely with them. If we want to get the Volocopter flying around Europe that will be a requirement as well with the FAA as that will cover the two major regulatory bodies.
"This is a global market, so we are looking around for other opportunities, obviously we are talking to Dubai but also to Singapore. Wherever the door opens, we will be there."