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A South San Francisco next-generation air mobility startup that’s developing aircraft for the logistics sector has raised millions in fresh capital.
Elroy Air Inc. raised $48.9 million in new funding, according to a regulatory filing with U.S. Securities and Exchange Commission. The document filed Tuesday shows the round could grow to as much as $52.36 million.
The company could not be reached for comment for this story.
The raise comes a few months after the company Chaparral C1 aircraft completed, which the company characterized as the world's first autonomous turbogenerator-hybrid electric vertical takeoff and landing aircraft, hVTOL, flight. The 57-second flight was the first time the company’s aircraft was not tethered to the ground and rose to an altitude of 7.2 meters.
Elroy Air claims the flight is helping it develop a so-called “middle-mile” aircraft to fulfill cargo delivery for commercial, humanitarian and defense needs and customers. Chaparral C1 is being developed to autonomously pick up 300 to 500 pounds of cargo, fly to a destination as far as 300 miles, drop off the load and repeat.
It’s unclear who invested or is leading the current funding round, but the company’s prior investors include SV Pacific Ventures, Yes VC, Lockheed Martin Ventures and Catapult Ventures, among others, according to PitchBook Data. Apart from the current round, the company has raised $93.23 million and was last valued by investors at $133 million in 2021, according to PitchBook.
Investors are being cautious about whom they back in the urban air mobility space. Many, like Elroy Air, are turning to private-public partnerships and seeking government contracts such as AFWERX’s, the Air Force’s innovation arm, Agility Prime program.
Venture capital backing of air mobility startups steadily grew from 2017 when VCs invested $600 million into these companies to 2021 when that amount hit $6.9 billion. VC dollars have backed off that high, hitting $4.4 billion last year and $2.5 billion in the first half of this year, according to a recent report by McKinsey and Co. With the exception of funding in 2023, when more than half of those dollars went to companies developing surveillance and cargo drones, a majority of the funding went to eVTOL startups.
Elroy Air, headed by David Merrill, a Stanford University and Massachusetts Institute of Technology alumnus, began working with the U.S. Air Force in 2019 under a small business innovation research contract to "understand and inform the USAF’s operational needs for distributed aerial logistics in contested environments," according to the company’s website. Three years later the company received additional support to their contract amounting in an additional $1.7 million value, however it is unclear how much the original contract was valued at.
Under the agreement with the government, the contract will fund the company’s technical demonstrations and performance validations including its unmanned cargo aircraft. It is expected that once complete the Chapparral program will be acquired by the Air Force.
In 2023, the company signed a new SBIR agreement with the Air Force and inked a similar agreement with the U.S. Army.
