Vertical Aerospace Seeks to Capitalize on Europe’s Defense Technology Boom

The ongoing conflict between Russia and Ukraine, along with President Donald Trump’s reluctance to support NATO allies, has led to a surge in investments in European defense technologies. Startups across diverse fields are capitalizing on this momentum.

One such company is UK-based Vertical Aerospace, which is dedicated to creating eVTOL (electric vertical takeoff and landing) aircraft for air taxi operations. The firm has received more than 1,500 pre-orders for its VX4 eVTOL from prominent clients like American Airlines, Japan Airlines, GOL, and Bristow.

Vertical is now publicly exploring opportunities within the defense and logistics sectors. The company recently revealed its plans to develop a hybrid-electric variant of its VX4 eVTOL.

“We have always envisioned this aircraft as suitable for defense applications,” noted Vertical Aerospace CEO Stuart Simpson in an interview with TechCrunch, indicating that the hybrid iteration of the eVTOL may reach a range of up to 1,000 miles, a considerable improvement over the original model.

VTOLs are particularly advantageous for defense applications due to their reduced noise and heat emissions. They can potentially be operated autonomously or remotely—features that Vertical intends to incorporate into its aircraft. The company has teamed up with Honeywell to design the flight control and management systems for its vehicles, with Honeywell also developing autonomous technologies for the U.S. military.

Vertical’s hybrid-electric initiative isn’t unique. In December 2024, California’s Archer Aviation launched a new division focusing on defense, partnering with weapons manufacturer Anduril to develop a hybrid-electric aircraft for critical military functions. This announcement helped Archer secure an additional $430 million in investments from current backers.

Simpson emphasizes that Vertical’s announcement regarding the hybrid vehicle isn’t opportunistic, as it has been in the works for 18 months; however, the timing does appear advantageous.

The European defense tech industry has undergone significant changes recently, as the region prioritizes homegrown solutions. Last year marked the emergence of $1 billion in venture capital investments in this sector, which has increased fivefold since 2018. New specialized defense funds have surfaced, including the €1 billion NATO Innovation Fund and Estonia’s €100 million defense fund. Lithuania plans to allocate 5% to 6% of its GDP toward defense, including investments in startups via its sovereign VC, Coinvest Capital.

In this changing environment, Vertical appears to have few competitors in the European eVTOL landscape. Following the bankruptcy of Germany’s Volocopter and the halting of operations by Lilium at the end of 2024, Vertical claims a unique position to meet the growing defense needs in Europe. With its upcoming hybrid-electric capabilities, it stands to become a significant player given the rising defense budgets and emphasis on domestic industrial capacities.

To fully seize these opportunities, Vertical may require additional funding. As per PitchBook, the startup has raised $468.8 million to date, largely through its reverse merger in 2021 and subsequent PIPE deals. Most recently, in January, Vertical raised $90 million in a secondary direct public offering.

This leaves Vertical considerably behind competitors like Joby Aviation (with $2.82 billion raised), Archer Aviation ($3.36 billion), and Beta Technologies ($1.15 billion).

“We’re currently spending around $100 million annually,” Simpson said. “In contrast, our rivals are investing between $400 and $500 million. We’ve successfully developed this hybrid vehicle efficiently within our budget.”

For context, Archer’s operational expenditure exceeded $500 million in 2024, partially due to a disagreement with Boeing and Wisk Aero. Joby’s operational costs approached $600 million last year.

However, both Archer and Joby are significantly investing in manufacturing to facilitate mass production of their eVTOLs. Simpson pointed out that Vertical will not ramp up manufacturing until it secures certification, which is anticipated by 2028.

“It’s easy to deplete finances in the rush to build and acquire manufacturing solutions,” Simpson explained. “Initially, you should excel at manual production before progressing to automation and simplification.”

Vertical aims to finalize its first certified pre-prototype of the VX4 eVTOL by next year, with more units planned afterward.

“The hybrid powertrain will be integrated into the next-generation version of our VX4, with flight tests expected to commence next year,” Simpson mentioned during Vertical’s first-quarter earnings call.

Currently, all of Vertical’s flight tests are conducted with a pilot due to strict UK flight regulations. In contrast, Joby and Beta have already performed piloted flights, and Archer intends to do the same soon.

Regarding Vertical’s military clients, the company has yet to finalize any contracts.

“We’ve engaged in substantial discussions with government entities and potential clients,” Simpson noted. “Our unique status as the solitary European player in this field grants us a significant advantage.”