The rise in geopolitical frictions combined with a new administration advocating for a stringent defense agenda has prompted many startups to adopt dual-use strategies aimed at tapping into military contracts for revenue. This trend is gaining traction in the aerospace sector.
Take, for instance, Archer Aviation, a startup from California focusing on electric vertical takeoff and landing (eVTOL) vehicles. Until recently, the company’s primary market entry strategy revolved around establishing air taxi networks across various cities in the United States and internationally.
Currently, Archer is pivoting towards defense applications, successfully attracting new investments to support this transition.
The company went public in September 2021 through a special purpose acquisition company (SPAC) and recently announced a $300 million equity round from institutional investors such as Blackrock and Wellington, bringing its total funding to approximately $3.36 billion. This follows a $430 million funding round in December aimed at launching its Archer Defense initiative.
As part of this defense initiative, Archer has entered an exclusive partnership with weapons manufacturer Anduril to co-develop a hybrid gas-electric VTOL aircraft tailored for critical defense roles. Both companies are positioning themselves to secure a program of record contract from the Department of Defense, ensuring budgeted acquisition with guaranteed funding over a specified duration.
“As we explored our work within the defense area, we discovered a much larger market potential than we had first anticipated, both in terms of scope and timing,” shared Nikhil Goel, Archer’s Chief Commercial Officer, with TechCrunch.
“We believe we’re the only company in this domain actively pursuing a significant defense program,” continued Goel. “We aim to be strategic in our investments and fully commit to this direction.”
Competitors like Joby Aviation and Beta Technologies also have military contracts for testing their aircraft in roles such as surveillance, logistics, and reconnaissance. Archer holds similar military contracts but is now seeking guaranteed funding through the program of record to enable growth and create a strong competitive advantage.
Goel mentioned that the newly acquired $300 million will mainly facilitate the collaboration with Anduril to develop the hybrid VTOL, although he did not provide updates on the company’s proposal to the DOD.
Archer is making this strategic move amidst a wave of industry advancements.
The Trump administration pledged to “rapidly integrate emerging technologies” such as artificial intelligence, drones, and counter-drone systems to modernize the military infrastructure. eVTOLs possess characteristics that not only make them ideal for urban and regional flights but also appealing for various defense applications.
Archer Aviation’s electrical aircraft, named Midnight, operates at an altitude of 300 feet and generates less noise than an average car passing on the highway. In urban settings, Midnight’s sound blends seamlessly with other transportation noises, unlike traditional helicopters.
“The acoustics of our aircraft uniquely position us for defense applications,” Goel stated. “Conventional helicopters used in defense are notoriously loud and emit significant heat signatures, making them less suitable for discreet missions.”
Midnight features a configuration of 12 engines and propellers—six positioned at the front and six at the rear. This arrangement allows for distributed propulsion with smaller rotors that spin at lower speeds, resulting in significantly muted noise levels compared to the conventional large rotor and tail rotor systems.
VTOLs are crafted to convert from vertical lift to forward winged flight similar to an airplane. In forward flying mode, Midnight generates lift predominantly from its wings, reducing the reliance on downward thrust, which in turn minimizes overall rotor noise, as detailed by Archer’s CEO and founder, Adam Goldstein, during a recent demonstration flight.
Archer’s Journey Towards Commercialization
While Archer aims to equip the defense sector with its aircraft, it still plans to launch its inaugural limited commercial air taxi network by late 2025 in the United Arab Emirates.
By 2026, Archer anticipates expanding air taxi operations to multiple cities and countries, including Los Angeles, San Francisco, New York, South Korea, and India. The company is collaborating with major airlines like United, Southwest, and IndiGo to establish these air taxi networks. Additionally, in November 2024, a joint venture between Japan Airlines and Sumitomo agreed to conditionally purchase up to $500 million worth of electric aircraft from Archer.
With 2026 on the horizon, Archer is aware of the tight timeline, having previously delayed its launches. This is partly due to the need for thorough validation of its eVTOLs’ safety and obtaining the required certifications from the Federal Aviation Administration.
In the U.S., firms developing eVTOLs must obtain type certification to validate their aircraft designs, production certification to demonstrate their capacity for mass production, and airworthiness certification to guarantee the safety of the aircraft for operation.
Goel affirmed that Archer is making considerable progress in the certification process but has yet to secure any official approvals. The company has not yet equipped its aircraft with a pilot, a crucial step before testing flights with passengers. Goel indicated that Archer plans to have a pilot onboard one of its Midnights “very soon.”
The certification process and scaling up production are both costly endeavors.
Construction of Archer’s factory in Georgia, a project in collaboration with strategic partner Stellantis, is nearing completion, with production anticipated to start in the current quarter. The company’s goal is to manufacture up to 650 aircraft annually by 2030. However, for this year, which is already underway, Archer aims to produce between eight and ten aircraft between its Georgia facility and its prototype site in California.
In October, Goldstein communicated to TechCrunch that a significant portion of the capital expenditures to establish the factory has already been utilized, focusing now on scaling up production of the Midnight eVTOLs while developing the hybrid defense aircraft.
Archer’s recent funding uptick has increased its total liquidity to over $1 billion, providing a financial runway for “several years” as the company moves towards commercialization and the early stages of its defense initiatives, as explained by Goel.
Although Archer has yet to disclose its earnings for the fourth quarter and full year of 2024, its total operating expenses for the first three quarters amounted to $385 million, or $281 million on an adjusted basis. The company expects its adjusted operating expenses for Q4 to range between $95 million and $110 million. It remains to be seen how much Archer’s hybrid aircraft development will further impact its overall expenses.
Compiled by Techarena.au.
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