Disclosed funding for future air mobility (FAM) has slowed since its 2021 peak of $6.8 billion, in line with a broader decline in venture funding for all sectors. Total FAM deal value was about $3.9 billion in 2023, and funding for 2024 is expected to be similar based on year-to-date trends, with nearly $2.5 million in funding announced by August.1
A shift in funding patterns
Historically, the majority of FAM funding has been invested in projects related to urban air mobility (UAM), including electric vertical takeoff and landing (eVTOL) aircraft, with surveillance/cargo drones in second place (Exhibit 1). The remaining funding was allocated to supersonic aircraft, regional air mobility (RAM), or the broader ecosystem. Together, UAM/eVTOL aircraft, surveillance drones, and cargo drones account for nearly 80 percent of publicly disclosed FAM funding received to date in 2024.
The major drop in UAM/eVTOL funding comes at a particularly bad time for companies in this segment. Some leading eVTOL companies are getting close to commercialization, with about a dozen already flying full-scale prototypes and some testing conforming aircraft as part of the certification program. AutoFlight and EHang have already received type certification for their aircraft in China, while others, such as Archer and Joby, are targeting certification within the next 18 months. Yet most of the players will require additional funding to complete the development, prototyping, and testing required for type certification, which typically requires $1 billion to $2 billion.
eVTOL players will also need funds to develop manufacturing and supply chain capabilities, which are often quite capital intensive, and companies planning to operate aircraft will need capital to build or acquire their initial fleet, particularly in the beginning, when the aircraft are still unproven and thus unsuitable for the asset-backed financing frequently employed for established aircraft models. Aircraft-manufacturing programs tend to be both margin- and cash-negative for many years post-certification, so the industry-wide funding decline spells a major challenge for eVTOL players.
Future outlook—and some possible solutions for closing the funding gap
While the funding decrease is rightfully generating concern across all FAM segments, there are some reasons for optimism. Current FAM orders are still strong—now numbering about 35,500 in total—and are valued at nearly $168 billion, including options and letters of intent (Exhibit 2). These figures show that a market exists for FAM aircraft.
While order quantities remained largely flat from 2022 to 2023, order value decreased by more than 40 percent. This decline is partly driven by a smaller share of orders for larger RAM or supersonic aircraft and a surge in orders for smaller UAM aircraft.
For many companies, including eVTOL players approaching certification and commercial production, orders may partially bridge the funding gap and provide a crucial lifeline if they contain pre-delivery payments (PDPs). New orders alone will not solve all financial needs for FAM players, however. As order backlogs continue to grow, OEMs will need to invest in manufacturing infrastructure and internal capabilities to achieve efficient full-scale production. Partnerships with aerospace and automotive incumbents can improve the learning curve, but new production facilities, machinery, skilled labor, and other capital requirements will make healthy balance sheets even more critical. Furthermore, OEMs that manufacture larger RAM or supersonic aircraft, which are likely to enter into service at the end of the decade or later, require funding over an even longer time horizon before they begin fulfilling orders.
As FAM companies mature, primary funding sources will transition from venture capital to growth or traditional private equity and will eventually involve retail or institutional investors through the public markets. Given the public importance and innovation associated with future mobility platforms, sovereign wealth funds and strategic buyers in the aerospace and automotive industries also have shown interest.
Investor funding will likely grow increasingly concentrated in FAM players that can derisk their future cash flows by demonstrating a clear path to certification, full-scale production, and customer demand in key early launch markets. We will continue to monitor industry funding and orders, including changes in specific sectors, to identify any emerging trends as soon as possible.
Robin Riedel is a partner in McKinsey’s Bay Area office, where Tita Ramos is a consultant, Ryan Brown is a consultant in the Seattle office, and Tore Johnston is a knowledge expert in the Denver office.
The authors wish to thank Jan Baier and Saskia Sammaritani for their contributions to this article.
1 Note that some FAM funding, such as investment from corporate ventures or internal R&D by large incumbents, is not reported publicly and is thus not included in these numbers.