That Chinese tech company DJI has a near 80% share of the US consumer drone market (Source: Bloomberg) is remarkable, and the strategic implications huge:
"The Pentagon has to sign off on every Department of Defence use of a DJI drone"
Dr Will Roper | Assistant Secretary of the Air Force for Acquisition, Technology and Logistics | April 2020
Personal drone adoption worldwide has skyrocketed in recent years with Business Insider predicting shipments will hit 29 million units by 2021. Whilst the enterprise / commercial market lags behind it is predicted to hit 805,000 units by next year and is growing at an astonishing CAGR of 51%. Much of the technology used is based heavily on that found in the same multicopters flown by hobbyists, with cameras increasingly swapped out for a range of sensors - from thermal imaging cameras to LIDAR.
The United States is acutely aware that it 'missed the boat' on consumer drones, and it's an understandably sore point. It irks Americans that they've ceded leadership to their biggest strategic rival and 'upstart superpower' - China. Shenzhen more than earned its monicker as 'the Silicon Valley of drones'. Playing catch-up has challenged even the supposedly invincible tech titans and venture capitalists of California's Silicon Valley (GoPro's 'bad Karma' is an illustrative example), but perhaps more importantly the geopolitical consequences of Chinese drone dominance appear to have reverberated around the corridors of the Pentagon for some time.
LET THE 'ORB WARS' COMMENCE
One consequence of this situation is that the latest area of rapid aerospace innovation - eVTOL - has firmly captured the attention of US industry, investors and now the Department of Defence. Leaders of all stripes Stateside are determined that America will indeed be 'first' in this new and exciting area of aerospace innovation. You'd be brave to bet against the combined brains and brawn that the American tech, aerospace and defence industries can muster. But is it all bluster from Uncle Sam? Have the woes of Boeing and bloated contracting of the military-industrial complex left them unable to compete? Or have they learned from the success of private contracting models pioneered by NASA that have transformed the US space industry into a hotbed for rapid innovation, supporting the growth of companies like SpaceX and Blue Origin along the way?
This week the world got a glimpse of just how seriously the American military is taking eVTOL with the slick (virtual) launch of 'Agility Prime'. They started, in typical military fashion, by inventing some new terminology that nobody really understood - though all credit to them for resisting an acronym. The Pentagon are interested in hybrid-electric as well as all-electric propulsion so eVTOL presumably didn't suit them, instead they're referring to this new generation of vehicles as 'orbs' - we're not sure that particular 'innovation' will stick...but you can see what they mean by it below:
Originally planned to launch at the famous SXSW tech / arts festival in Austin, Texas the Agility Prime conference is run by AFWERX (USAF's initiative for industry engagement and innovation). The event itself feels far from the drab and boring event you might expect a large public body to run - quite the opposite in face. By partnering with private sector contractors (like theDifference) it's been an object lesson in how to run a virtual conference. Well-branded, slickly run and peppered with a variety of highly engaging speakers and moderators from organisations as diverse as NASA, Uber, the US Air Force, venture capital firms, startups and nearly every branch of the US military - it's provided incredible access to some of the aviation world's absolute brightest minds.
From having artists on-hand to document the event to hosting dozens of breakout and networking sessions on Zoom, Agility Prime has provide quite unprecedented public access to eVTOL leaders. There's been something especially surreal about talking with Colonels, entrepreneurs and Venture Capitalists nearly all of whom are at home like the rest of us and subject to interruption by pets, family members and noisy neighbours! If anything this levelling of all participants to 'just another person at home' has relaxed participants into a level of engagement I suspect you'd never see at an in-person conference. We highly commend all involved - the execution of Agility Prime has frankly been second to none.
Running from April 27th to May 1st the event was kicked off by Dr Will Roper, Assistant Secretary of the Air Force for Acquisition, Technology and Logistics. You can watch his speech in full here but we've summarised key points below. Make no mistake - the DoD is getting involved in (e)VTOL in a big way, and their aim is to secure a strategic industry for US national benefit.
During the Cold War some 80% of US R&D took place in the military, and 20% in private industry - today the opposite is true with the military only responsible for an estimated 20%
The Pentagon is determined not to 'miss the boat' with eVTOL as they have with consumer / commercial drones
As a result the US military are re-engaging with industry through initiatives like AFWERX whose activities range from hackathons and startup accelerators to rapid contracting, Air Force Ventures and initiatives like Agility Prime
Dr Roper is worried by a perception from commercial investors that engagements a business might have with the DoD are currently viewed as a detractor and reduce the probability of a company securing private capital investment. Whether that's as a result of prescriptive requirements or slow procurement cycles the theme is familiar to businesses dealing with large bureaucracies worldwide. Public contracts slow things down. In highly competitive, nascent industries driven by cutting edge technology - speed and agility are everything and military contracts are perceived to slow things down.
HOW THE PENTAGON wants to HELP REDUCE RISK
For aerospace startups and SMEs attracting venture capital and private equity investment is tough enough - a combination of prescriptive regulation and long timelines for certification and product development mean that it can take longer to get an aircraft or component in the air and earning money than the c. 10 year typical lifetime of an equity fund. Add to this a complex approval process for military contracts (that might never come to fruition) and government's habit of pulling programmes, sometimes at no notice, and it's no surprise that aerospace innovations are far less attractive to invest in than say a clutch of lower-risk, high-growth software startups.
Aviation itself is a sector that makes many investors nervous - mistakes can cost lives. Compound that perceived risk with untested aircraft of entirely new configurations operating over populated areas, in high numbers and according to regulatory frameworks and operating procedures that are as yet undefined - and you can begin to grasp the scale of the challenge that eVTOL upstarts face.
You'd be forgiven for thinking that nobody would invest at the moment, but you'd be wrong - billions of dollars of capital have already been deployed in the US, Europe and Asia - you can find a summary of some of the top players in our article here. Funding has often come from corporate venturing arms taking a long-term strategic view of the opportunity (eg. Toyota AI Ventures, JetBlue Technology Ventures, Tencent) rather than from more 'traditional' Venture Capital funds - though there are exceptions such as London-based Atomico whose appetite for 'deep tech' investments is atypical amongst their VC peers.
How then to ameliorate all this risk? Or in aviation safety parlance to reduce them to a level 'As Low As Reasonably Practicable' (ALARP). And how and why is the Pentagon getting involved?
Dr Roper sees Agility Prime as an example of how the US military can re-position itself amongst its peers in industry - he wants the DoD to be seen as 'the innovation partner of choice' in eVTOL - a lofty ambition. He sees an active and interventionist role for the US military here - wanting to drive, shape and accelerate the commercial market for this new breed of aircraft. The goal is as bold and simple as ensuring that the eVTOL supply chain doesn't go abroad, as Dr Roper puts it:
"We do not want the commercial market to evolve without our involvement"
Fixed-wing aircraft like the Harrier and F-35 alongside myriad rotary platforms are proof enough that militaries worldwide have long seen the value of VTOL capability in a combat environment, but why is the US so interested in this latest crop of electric and hybrid aircraft? Speakers this week have alluded to extensive analysis across the US military with broad agreement having been reached that these new vehicles have some significant advantages over the aircraft of today. The Pentagon's view is that:
They'll be "exceptionally" cheap to purchase vs 'conventional' aircraft
'Pilot' training should be significantly quicker and cheaper thanks to new control system architectures which give operators greater capacity for mission focus whilst flying (think drivers being turned into 'flyers' rather than pilots) and a ready-made roadmap for remote piloting, automation and towards autonomy
Maintenance will likely be far simpler and radically cheaper vs existing fleets
Craft with distributed electric propulsion (DEP) have a potentially far lower noise footprint than traditional rotorcraft, particularly useful for eg. spec ops missions, discrete resupply and increased serviceability and safety through greater redundancy
Operational constraints in-the-field such as fuel supply and runway infrastructure won't be required giving greater operational flexibility
Having 150 war fighters in-theatre distributed in groups of five across 30 aircraft vs 150 on a single aircraft also spreads risk and yields interesting new capabilities
Those quite specific numbers are noteworthy as Roper is quoted as having said in a call with journalists this week (as reported by Vertical Mag here) that:
“We want to have 30 vehicles in the Air Force...there are multiple companies that can do that.”
Interesting to note was that Roper did not want to set military-specific requirements for vehicles but instead to support those that were being developed for commercial use, presumably to avoid slowing down development. And the commercial Urban Air Mobility (UAM) market has been well presented in the event all week with high ranking officials like Paul Sciarra from Joby participating as well as Uber's Elevate heavyweight Mark Moore, whose presentation you can see in full below:
STIMULATING A NEW INDUSTRY FOR STRATGIC BENEFIT
In terms of how the DoD specifically intends to stimulate the US eVTOL industry there are some concrete offers on the table, presented collectively as an 'Air Race'. Examples of how they intend to act include:
Buying aircraft - to fulfil government use cases such as distributed logistics and disaster response (presumably as well as further developments for military applications at a later stage), the US Air Force alone are initially looking for at least 30 aircraft to be procured latest 2023
An Innovative Capabilities Opening (ICO) that represents a simplified three-stage, non-competitive contracting process through which the military can work with companies and award contracts entirely at their discretion
Partners are specifically being sought in three already defined Areas of Interest (AOIs):
AOI 1 - 3-8 passenger (or equivalent) payload / 100+ mile range / 100+mph speed / 60+ min. endurance / first full-scale flight before 17/12/20
AOI 2 - 1-2 passenger vehicle (or equivalent) payload / 10+ mile range / 45+ mph speed / 15+ min. endurance / first full-scale flight before 17/12/20
AOI 3 - no passenger carrying requirement, 500+lb cargo payload / 200+ mile range / 100+mph speed / 100+ min. endurance / first full-scale flight before 17/12/20
For those successful the offer includes:
Access to testing ranges, assets and infrastructure that are "the envy of the world" - to help build confidence in the safety of aircraft and collect huge volumes of data to accelerate the development of civilian safety standards
Support for the whole process of certification - "we'll make sure they're certified to fly for us" and the FAA will follow - an expectation was aired that what the military do on certification will be mirrored to some extent in forthcoming domestic legislation
In summary, through the Agility Prime programme the US military seeks to de-risk the safety and regulatory uncertainties that are potential barriers to the commercial adoption of Urban / Advanced Air Mobility vehicles, and thereby accelerate the market and secure a strategic supply chain capability in the United States.
The US military "put exotic things in the air and make sure that they land after they take-off" - and it's hard for anyone in the world to compete with their ability to do that.
They're betting on the fact that if the USAF helped ensure it was safe - people will trust it - and it's hard to argue with that.
CONNECT WITH AGILITY PRIME / afwerx
AFWERX YouTube Channel - which includes full livestreams from all five days of the conference
Agility Prime also has an active community on Slack here