December 9, 2019 | 3-minute read (533 words)
Trying to figure out which sectors of the industry will make mega deals in the new year? According to an analysis released today, the answer could be electric air taxi startups.
That’s the word from PitchBook’s 2020 Emerging Technology Outlook, which foresees the so-called “flying car” industry as a potential recipient of record deals during 2020. “Our analysis shows that elevated venture funding activity in the electric air taxi space and rapid cash burn rates of leading air taxi startups have set the stage for potential VC mega-deals ($100 million+) in 2020,” the report notes.
In fact, PitchBook adds, the air mobility category could steal market share from the helicopter industry and ground-based transportation services sector, even though commercializing air taxi services may prove difficult due to regulatory issues and limitations in battery technology.
Helicopter Industry At Risk?
If electric air taxis are adopted into the mainstream, helicopter transportation services would be the first category affected, PitchBook notes. The advantages of electric air taxis over helicopters are that they are less expensive to operate and maintain, and may not require human pilots to fly them. Uber predicts that the autonomous air taxi service it’s creating in partnership with Bell Labs (known as Elevate) could eventually end up being priced at about $2.00 per mile. In comparison, traditional helicopters cost about $9.00 per mile to operate.
It should be noted that startups in this category have already brought in significant funding. Joby Aviation has raised over $128 million so far, Lillum has brought in nearly $101 million, Volocopter has raised over $96 million and EHang brought in $52 million, PitchBook indicates.
None of the startups in this space have deployed their technology yet, and although some seem to believe they will do so by the middle of 2020, PitchBook suggests that’s an overly aggressive estimate. “For this potentially disruptive industry to progress, the energy density of lithium ion batteries will need to improve,” the company notes in the report. For instance, EHang can fly its two-seater aircraft for about 20 minutes prior to requiring a recharge.
In addition, regulation of the industry could be slow to transpire, as many municipalities don’t yet have the framework in place for autonomous air vehicles, and bureaucracy could make this process even slower.
Autonomous Vehicle Startups Ripe for Acquisition
PitchBook also had predictions about autonomous ground-based vehicles, noting that this sector is likely to see M&A activity in 2020. Existing technology firms are expected to make offers to buy startups in the space, as many of the newer firms find it challenging to raise capital. Some activity has already taken place so far in 2019, such as Apple’s June acquisition of Drive.ai for $77 million.
The autonomous trucking industry is also expected to see M&A activity, PitchBook notes. “In our view, Amazon would be an obvious buyer for a self-driving trucking startup,” the report states. “The company stands to benefit significantly from automating its vast logistics network.”
Post-money valuations in the autonomous vehicle category have been robust this past year, with Cruise valued at $19 billion and Uber ATG valued at approximately $7.3 billion.