At Aerial Cities 2024, key stakeholders from both private and public investment sectors addressed a pressing topic: How are investors navigating the evolving landscape, adapting their strategies, and identifying high-growth opportunities despite recent adversities?
In this panel session, decision-makers and key players already invested in drones or advanced air mobility (AAM) shared their insights and perspectives on the drone and electric Vertical Take-Off and Landing (eVTOL) markets following a particularly challenging year in 2023. Panellists discussed the impacts of these challenges on market dynamics, investment trends, and future opportunities.
Dario Di Martino, Founder & CEO of DMD Solutions, moderated this dynamic panel and was joined by other key figures from across the industry, including: Gabriela Matic, Co-founder & Director at Metta/ Venture Partner at Aerospace Xelerated; Gary Cutts, Challenge Director for Future Flight at UK Research and Innovation; Gordon Baker, Policy Lead for Robotics at the Department for Science, Innovation & Technology (DSIT); and Etienne Louvet, Founder & CEO at IONA.
Navigating the changing investment landscape in aerial mobility
Investment trends in the aerial mobility space have shifted significantly over the past few years.
As moderator Dario noted, in 2020-2021, startups could raise capital with a strong proof of concept alone. However, by 2023, investors were looking for tangible revenue generation. The panel explored this shift and what it means for 2024, 2025, and beyond.
Etienne opened the discussion by shedding light the evolving nature of the economy, highlighting the pressing need for businesses to explore new ways to create value and maintain a competitive edge.
“I really think that there is a shift in the economy (…) software is becoming a commodity, so we need to find new ways to create value, and we need to find new ways to create defensibility in businesses.”
He also highlighted the need to balance risk and reward, and how the disconnection between the two has led to challenges. “If you are targeting a super niche market but asking 200 million just to get a proof of concept, there is a problem,” Etienne explained. He emphasised that the end goal is not revenue. Rather, the end goal is what your path is to profitability. Gordon echoed this, pointing out that while drone technology has often been overestimated in the short term, it is underestimated in the long term. He referenced PwC’s projection of a £45 billion UK drone market, highlighting its potential but stressing that regulatory and commercial readiness are key factors in achieving that scale.
Gabriela explained that there is no established playbook for scaling drone businesses, making it difficult for investors to evaluate risk. However, while they may not have many success stories, they do have failures; and these offer valuable lessons. Conducting a ‘postmortem’ on what didn’t work helps highlight gaps and where the focus should be turned to instead. Learning from past failures, she noted, is as important as studying successes.
In the topic of learning lessons, Etienne also pointed out that scalability is about knowing when to exit and when to expect returns. In Europe, many businesses focus on short-term steps, but without scalability and a supportive ecosystem, long-term competition is difficult. Investment decisions must consider not just the company but also its environment and competition.
“If you have two companies doing exactly the same thing, and let's assume that it's a good thing and they're doing it well; the problem is an investor will always and should always invest in the company that is in the best environment, connected to the best people, capable of raising subsequent rounds of funding, and so on.”
And that’s one of the reasons why he moved IONA’s headquarters to the US — it offers a more favourable environment for raising capital at scale.
Gary weighed in on the challenges of scaling drone startups, particularly in the aspect of acquiring funds. When he first started in the industry five years ago, getting an investment was relatively straightforward. He noted two main reasons for this: First, when there’s plenty of capital flowing, funding is easier to secure; and second, a strong pipeline of great ideas naturally attracts investors.
“And I would suggest that four or five years ago, both of those were true. There was a lot of cheap money flowing around the world, and drones were relatively in their infancy in a really big, exciting tech-driven industry,” Gary added.
Over the past year, he pointed out, SMEs and startups have found it increasingly difficult to secure funding. With capital no longer as cheap, scaling in sectors like drones and eVTOL has become more challenging, particularly due to regulatory hurdles. However, this should not be seen entirely negatively. He predicts that between 2025 and 2026, two contrasting trends will emerge: Some businesses and business models will fail as reality sets in, while others will reach the stage of generating real revenue and profit.
“I think you'll see both happening in parallel, and one of our challenges when we talk to investors is not to let people get spooked by the first few big casualties that go under and people then extrapolating that to the industry (…) No, that's just one business model that didn't work at one point in time.”
It’s important to not only stay positive but also – and especially – ensure your company always has the most important factors investors are looking for when it comes to scaling.
Key indicators of scalability and investment readiness
With investment criteria becoming more stringent, the panel discussed the key factors that make a company attractive for funding and scalability.
A strong, adaptive team
Investors prioritise teams that can pivot when needed. Panellists all agreed that human capital is one of the most important factors when it comes to suggesting scalability and choosing which companies to invest in.
Etienne emphasised: “The only thing that can prevent a company from failing is not the very specific milestone that they had or the funding stream that they just received — it’s the capacity of the team to adapt because it’s going to change, and it’s going to be painful.”
Gary mirrored this sentiment, highlighting the need for companies and entrepreneurs to always have the “adaptability piece.”
“I think that it's more about the ethos of the company; the degree to which the people are adaptable (…) it's the willingness to be adaptable and take feedback and amend things, so I think it’s more of a mindset thing,” he explained.
While many indicators suggest scalability and help persuade investors, human capital is one that cannot be overlooked.
A defined market fit and revenue model
Gabriela stressed that having cutting-edge technology isn’t enough; startups must have a structured plan for monetisation and demonstrate clear value to an end-customer. There needs to be problem-solving either for some end-customer or for the world. She agrees that human capital is essential, but that does not eliminate the need for a path to some survivability and eventually revenue.
Gary outlined a three-part approach to assessing scalability:
- “Is there something really smart here? Is there a basic innovation that’s technically worth going after?”
- Can you see a way that you can get that to market?”
- Identifying the “adaptability piece,” an extremely important factor as investors want to fund people who can chase the evolving market and adapt to unexpected changes.
He explained that a company possessing all these three is the combination of a team innovative enough and with the know-how necessary for success.
Etienne also stressed the importance of a defined market fit and revenue model, noting that if a company dies at a relatively early stage, it means that they were not ready for what’s coming next anyway. He believes that in a smaller market, if the beginning is easy, the end is going to very tough, and the opposite around.
Regulatory preparedness
Gordon and Gary agreed that businesses working closely with regulators will have an advantage over those waiting for policies to align with their vision.
Etienne noted the importance of an adaptable approach to scaling, especially in a fast-changing environment. He explained that investors favour businesses that not only understand the current landscape but can also anticipate and adjust to new developments in policy and public perception.
The discussion further expanded on the different business models that are emerging in the aerial mobility sector. Gabriela pointed out that some startups are relying on government contracts and grant funding to establish themselves before transitioning into commercial markets.
She also explained that governments and regulators should maintain transparency on future regulatory expectations to help companies plan accordingly. Due to tight cash flows, it is crucial for these regulatory bodies to maintain, or even increase, transparency about future developments, as founders and businesses need clear guidance on what to prepare for.
As Gabriela explained, while discussions, collaboration, and shaping the industry's future are important, it is equally vital to ensure that innovation is not lost along the way.
Meanwhile, Gordon highlighted how some companies are securing long-term partnerships with logistics firms and emergency services to prove their business viability before seeking large-scale investment.
Top strategies investors use to manage risk
Dario then asked panellists to share the strategies they use to manage the risk from startups and other enterprises.
Etienne explained that he likes using Jeff Bezos’ one-way vs. two-way door approach when it comes to risk assessment and risk mitigation. Essentially, when making a decision, he asks himself: ‘Is there something that I can’t go back on? Is it set for life or reversible in the future if needed?’
“When we understand very, very deeply what is the logic behind the framework, we can make decisions; and we can make decisions that are based on a very, very precise column of ‘this is set for life, and we can't change that’ and ‘this is something we can change’, and then the complexity of probably starting a business in drones is to understand what is connected to your business case and what isn't, ” Etienne elaborated.
In other words, the business case needs to be aligned with the regulatory framework and with the technological capacity. The only way to do that is by having a clear framework in your mind of what decisions you need to focus on.
Etienne also highlighted a key challenge facing the ecosystem today: the increasing globalisation of the market. Rather than seeking exclusive funding opportunities or superior resources, businesses simply need access to funding and support that are on par with their global competitors.
“I think the main pain point for the entire ecosystem at the moment is that the market is globalised, so you don't need access to a specific funding stream or something that is better than anyone else; you just want access to something that is at least as good as anyone else,” he explained.
Gabriela highlighted that her strategy approach to risk mitigation goes beyond simply supporting founders and their portfolio; she also focuses on fostering partnerships and building a strong ecosystem that helps reduce risk. A key factor in her investment decisions is selecting companies that demonstrate a clear understanding of the regulatory and certification landscape. Additionally, she mitigates risk by ensuring robust safety measures, such as demanding comprehensive safety data and requiring solid evidence of the technology’s reliability.
Gary explained that large institutional investors prioritise foundational digital and software technologies, as they are more adaptable, less capital-intensive, and less likely to become obsolete. He personally emphasised adaptability, noting that both technology and markets are still evolving, and it is uncertain which will be most important in five years.
“If you're in a world where the regulations are developing, the public attitudes are developing, the technology is novel, and you don't really know where the market is; what should you be? Be really adaptable.”
Gordon highlighted the UK CAA and Innovation Hub’s efforts to de-risk and support proof-of-concept developments. While drones could enhance safety, such as preventing railway accidents, many business models struggle to align with the CAA’s risk-averse flight regulations, creating challenges for investment and adoption.
“Risk is looked at in different ways by different elements of government and companies, and I think it's a non-universal but collectively owned challenge,” he explained.
And yet, panellists remain positive about the future.
Overcoming regulatory and infrastructure barriers to scale
A recurring theme in the discussion was whether the necessary regulatory infrastructure, such as unmanned traffic management (UTM) and electronic conspicuity mandates, will be implemented in time to support scalable drone operations.
Gary was confident: “It absolutely will!” According to him, the challenge is not whether but when. The industry needs to remain engaged and proactive in shaping that landscape.
All other panellists mirrored Gary’s optimism, noting that these mandates have to come in time, and that they certainly will.
However, Etienne cautioned that regional disparities in regulatory timelines could drive businesses to relocate. If businesses must wait too long for regulatory approval, they will relocate to jurisdictions that enable faster progress.
When asked how governments and regulators can avoid stifling innovation and prevent companies like IONA from relocating, Etienne emphasised that understanding an emerging market is inherently challenging for both governments and large corporations. Rather than focusing on a single solution, he stressed the importance of adopting the right attitude.
In some countries, Etienne explained, there is a willingness to engage in open discussions, recognising that these industries are crucial for the future. By working backwards, such as identifying what is needed to support growth while aligning with government priorities, policymakers can create a more supportive environment.
The discussion also touched on the interplay between public and private investment. Gary outlined the role of the UK’s £125 million Future Flight Challenge in fostering an integrated ecosystem for urban air mobility (UAM).
Meanwhile, Gordon highlighted the UK Ministry of Defence’s increasing interest in drone technology, with £4.5 billion earmarked for defence-related unmanned aircraft system (UAS) initiatives.
Ultimately, there is no single fix, but fostering collaboration and forward-thinking policies can help ensure innovation thrives.
Building a sustainable future for urban air mobility
The panel concluded by offering a forward-looking perspective on how startups can position themselves for long-term success. Adaptability, strong regulatory engagement, and financial planning emerged as the most critical factors for sustainability in the industry.
Etienne emphasised the need for clear milestones and strategic partnerships to ensure companies stay on track. He pointed out that companies that diversify their revenue streams — whether through direct-to-consumer deliveries, government contracts, or partnerships with infrastructure developers — tend to be more resilient in the long run.
He also advised against relying too heavily on military contracts as an initial market entry point.
“When companies go for a go-to-market strategy that includes military first and then civilian applications, it usually doesn’t work.”
Gabriela noted that aerial mobility companies need to invest heavily in public perception and awareness.
“People won’t accept drones filling the skies if they don’t see the benefit. Communicating how these technologies improve everyday life — whether through medical deliveries, reducing emissions, or improving infrastructure — will be key to widespread adoption,” said Gabriela.
As Gary summarised: “We are at a turning point. Over the next two years, some companies will fail, but others will break through to profitability. The key is to be among the latter by staying adaptive and focusing on real-world applications.”
The conversation at Aerial Cities 2024 emphasised that while challenges remain, the aerial mobility industry has immense potential.
The future of urban air mobility is not just about innovation — it’s about creating scalable, profitable businesses that can thrive in an evolving regulatory and market landscape. The next few years will be critical in determining which companies rise to the challenge and which struggle to secure their place in the market.
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