Why Scott Invested In Vertical Aerospace — ft. Stuart Simpson

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0:55Time to check on the skies. It's another sunny day in Calgary. Forecast calls for high levels of economic activity. Late afternoon, we've got a burst of potential in a place ranked North America's most livable city. Tomorrow, blue sky thinking in the blue sky city should hold steady. And the outlook remains optimistic throughout the week. So come grab your dreams and enjoy watching them take hold. It's possible in Calgary, the blue sky city. For the full economic forecast, visit calgaryeconomicdevelopment.com. Rinse takes your laundry and hand delivers it to your door. Expertly cleaned and folded.

1:29So you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you. Like tea time you. Or this tea time you. Or even this tea time you. So did you hear about Dave? Or even tea time, tea time, tea time you. So update on Dave. It's up to you. We'll take the laundry. Rinse. It's time to be great. Today's number, 200 Swiss francs. That's how much Tour de France writers get fined for peeing in front of spectators. True story, Ed, I was at the local community pool, and they said, no peeing in the pool. And I said, come on, everybody pees in the pool. And they said, yeah, but not from the diving board.

2:12Listen to me. Markets are bigger than us. What you have here is a structural change in the wealth distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it. That beat out, you know, it's okay to pee in the shower, but everyone freaks out when I shower and pee. Little free gift with purchase there. Two for one, Ed. Maybe you should have saved one of them for a future episode. There you go. Regardless, welcome to Property Markets. Today we're speaking with Stuart Simpson, the CEO of Vertical Aerospace. But first, it's time for banter, Ed. It's time for our favorite part of the show.

2:46First off, let me just point out, you're now showing up late to every podcast. You have decided that you are very important. No, no. Wrong. Oh, and what do I see this morning? Literally, talk about a boner killer. I wake up, and I, of course, turn over, you know, like a 13-year-old, and turn on my phone. What is the first thing that pops up in my Instagram feed? Yes, it's me. Yeah, well, first it was Katie Tour, which I would not describe as a boner killer, but that's neither here nor there. and then I see her interviewing you and she's like, Ed, tell us why Gen Z went for Trump. And I'm like, oh my God, make it stop.

3:26And you're there in like a cool, cool brown suede coat. And you're like, well, Katie, the first thing is the Republicans meet us where we are on TikTok and YouTube. And I'm like, well, that's some fucking blinding insight. no shit, Sherlock. I'm like, that's how you get on MSNBC? The Republicans are on TikTok. Anyway, I literally couldn't watch a thing. I skipped to watching Great Dane's frolic with each other. But you're on again. So I'm going to assume you said something actually interesting. What else did you say? What else has the Trump administration done to meet Gen Z, who pivoted very hard towards Redness last election?

4:04This is not the time for me to do my whole spiel, I don't think. Okay. What, are you going to do it on Colbert next week? Oh, wait, nevermind. Exactly. Never mind. Never mind. All right. Never mind, Ed. Forget it. Forget it. I'm trying to banter here and you're not cooperating because you clearly want to impress the people at MSNBC. Yeah, exactly. Well, your opening line for banter is that my appearance on TV was a, quote, boner killer. That's how you describe it. Yeah, I got to avoid those. I got to avoid those. Yeah, no, when that shit happens, can't let anything get in the way of that. Oh, my God.

4:41Oh, my God. Oh, I love it. I love it. What have you been up to? I'm in Aspen. I'm headed to Chicago. Super excited. I got a speaking gig. My son, I'm taking my youngest, my 14-year-old. There's two cities in the world he wants to go to right now. One is a city in China. He's seen TikToks on some amazing city in China. And the other city really wants to go to is Chicago. And I'm like, we can do that. So I get to pick the hotel. We're staying at the Soho House. But he gets to pick what we're doing. So we're going to the McDonald's headquarters or the factory, the McDonald's Museum. Oh, God. Seventh circle of hell.

5:15I'm like, do you get free colon cancer when you go? I didn't say that. But anyways, two, we're going in any city we're in, we have to go to the tallest building and go to the observation deck. I mean, that's just amazing whatever city we're in, he's decided. and then what's the third thing oh we're going to he goes the best steakhouse in the world is this place called gibson's he said but for lunch we're going to the place that holds the world guinness book of world records for the deepest deep dish pizza in the world so this is going to be it's going to be a great couple days in chicago ed where is he learning all of this stuff maybe youtube i think he gets it mostly from tiktok yeah that sounds like a decent trip i don't know Could be worse.

5:54Oh, you'll see. This stuff is like, you start getting panicked because I used to take these trips and they were great. And then when your kids hit 13 or 14 and they refused to stop growing, you realize pretty soon. And then your son's taking the ACT. You realize, oh, my God. And then you see those TikToks, which are heartbreaking, saying that by the time your kid is 17, you have spent 90 % of the total time you're going to spend with that kid. and so and that really grips you and so now i'm just like trying to plan as many trips as possible with these with these guys but anyways we're off to chicago ed good stuff okay here's our conversation with stewart simpson ceo of vertical aerospace and a disclosure scott is an investor in vertical aerospace so i will be leading this conversation uh stewart thank you very much for joining us on prof g markets ed great to be with you and scott thank you very much for the uh investment.

6:50Really appreciate it. So Stuart, you are the CEO of an electric vertical takeoff and landing company. This is a new sector that has come up. People call it the EV toll industry, spelled out E-V-T-O-L, electrical vertical takeoff and landing. So for our listeners that are unfamiliar, explain to us what this actually is. What are these eVTOL aircrafts? Why are they important? And what makes them different from, say, a helicopter, which to me sounds quite similar? An eVTOL is an electric, as you said, vertical takeoff and landing vehicle. It is different to a helicopter in that it is safer than a single-engine helicopter.

7:42It's silent in an urban environment with zero emissions. And it takes off vertically. And then once it's taken off vertically, we have tilt rotors on the front of our wings. And as the rotors tilt, you accelerate and then you fly on a wing, making it extremely efficient. And having a wing as part of our design, as they see VTOL, means you can work with current battery technology. So this isn't something that's coming in the future. this is here right now and is working and we're just driving to certification when we can then put the product in the hands of our customers. And in what situation would you use one of these aircrafts?

8:23Am I using this to go to work? Is this sort of an equivalent to a taxi? Is this more long range? What are the use cases? How are people using this? The use cases are endless for this product. We as a business, we have over$6 billion worth of orders from an incredible customer group, including American Airlines, who I'm sure your listeners have heard of. They've got an order in for$350. Bristow, world's largest helicopter operator, have got an order in for over 100 of these. AirAsia, Japan Airlines, Gol, Gosen, all across the world. Now, that kind of gives a bit of a hint as to how these are going to be used if you think of aircraft companies.

9:06The first use cases are probably going to bookend international flights. So for example, if you fly with American from say Heathrow to JFK, you can then jump on one of these and then fly directly into Manhattan, completely transforming that experience rather than having to spend two hours driving in, you can be there in seven minutes. So that's one early use case. If you look at Bristow, the helicopter operator, they do a huge amount of emergency services within cities, moving people and things around. Again, that'll be an early use case for the product. You know, Scott has made investments in many companies, and we could just have the CEOs of many of different Scott's investments on the podcast.

9:51But I think the reason that this is important is because you're kind of at the forefront of a step change in the way transportation works. And, you know, we think about what the future of transportation looks like. We've been talking a lot about robotaxis and the ways that robotaxis are, in many cases, going to succeed the car, maybe replace the regular car. That certainly seems the way things are headed. But I think if we were to go a step further, there is potentially an argument to be made, or it seems as though that the EV tolls are going to replace many other forms of transportation. I mean, I would rather get out from, you know, let's call it Manhattan to Long Island in seven minutes through the sky, than driving for three hours or taking a train for two hours.

10:49It's just is a better way to travel. So, with that in mind, give us your view on the future of transportation. And, you know, to the best of your ability, without talking your own book, where does the eVTOL sit in that conversation? Is this the future of transportation? Is this going to do what the robotaxis are doing to the car? I genuinely believe this is the first step to highways in the sky. So the goal here is mass transport. This is not something for the luxury. This is the goal is mass transport. And just to bring that to life a bit, we've modeled out over 1 ,200 routes with our customers.

11:35So we get our customers together twice a year for three days. They tell us how they're going to deploy the aircraft. We look at mobile phone data for the density of population movement on the routes they're talking about. And then we map out, okay, how many people do you think we can attract onto this type of product? Without stressing the deployment of the asset, so you don't have to run it 24 hours a day or anything, you can run it a pretty normal way. You get to a cost per seat per kilometer of$2, which is the same as an Uber Black or, for your listeners in London, a Black Cab. Now, that is a truly mass market cost point.

12:16Now, of course, that won't be the price point because we are an OEM. We design, engineer, sell, service the aircraft. We'll sell it. But we're putting in the hands of our customers something that creates an incredible economic opportunity for them. So this is that first step to highways and sky. And just building out on what I mean by that, if you look at a map of LA, you can see the age of the building by the ones that were built in the 60s and 70s have a helicopter pad on top of them. And then they were just pushed out because the noise, like residents hate helicopters. So they were licensed out pretty much every city around the world, apart from maybe Sao Paulo.

12:57So every city will have one or two routes, but they're not everywhere. I'm sure you know in Manhattan, there's a huge pushback against helicopters. And then you have the terrible tragedy with the crash recently. What this does is it creates a product. It is putting something out there that truly revolutionizes the skies. It isn't just me that's saying that. A great reference report Morgan Stanley wrote four years ago. They talked about a trillion dollar market in 2040. they just updated it actually about a month ago and they doubled down and said this is a trillion dollar market in 2040 and a nine trillion dollar market in 2050 now those are staggering numbers and it kind of doesn't matter if they're plus minus you know 20 right or not this is genuinely what we see out there and from a business perspective what i see is demand way exceeding supply through 2040.

13:52Stuart, good to see you. So I'm fascinated by aviation. This is my second investment in aviation. I invested in Boom Technologies, the company trying to build the first commercial supersonic plane since the Concorde. And quite frankly, it's been a graveyard for investors. It's just been a terrible place to invest. And we've seen is exciting. All the numbers make just so much sense around replacing this kind of dirty, dangerous technology. And the last mile is the problem to be solved in transportation. Everyone knows the market is there, but a bunch of these companies have already started and gone out of business.

14:28There's sort of three holding on, right? Archer, Joby, and Vertical. What's different this time? Why will this category return the investment or have a return for shareholders versus almost every other aviation company? Why has aviation traditionally just been such a terrible place to invest and what's different about this category? When I was looking around, I was first approached to join Vertical, gosh, two years before I joined the business. And I spent 18 months to two years looking around the sector, talking to investors, analysts, customers, suppliers, competitors, to get a sense of, was this industry real?

15:06And what kept coming back to me was that the whole things changed from the 50 years ago the fantasy to maybe five years ago very frothy to four years ago to two years ago it was starting to coalesce and in that last 12 and it was you know coalesce become real like the technology if you had the right design the technology was capable of working and what's happened in the last 12 months as you say there's been a huge shakeout there are really only three, four at best kind of hanging on in there of which verticals one. The first defining thing is physics. You have to have an aircraft that works with the current technology.

15:47We've seen lots of people have designs where the physics needs next generation or two generations away battery technology. I'm sure your listeners can look at our social media and see our aircraft flying. We did a flight in and out of the world's largest military aircraft show last week and then flew home yesterday. This works. And it works because our physics is right, because we've got a wing. And a wing means you are incredibly efficient. So all of the companies that are left have broadly similar designs, because that's the physics that works. The second thing is funding. a lot of companies raised a lot of money burnt it very quickly because they didn't have the right business model or they didn't have the right physics there's been two and a half billion dollars flown into this sector in the last nine months and that's picking out the winners that's the market really picking the winners and within that why is vertical you know a success we have been able to get out and access capital and we've raised 160 million in cash in the last seven months, which is fantastic.

16:56And that sets us apart with our other peers as being in the game, the right physics and access to capital to drive to certification. So against that, why can we get a return? Why Vertical is best placed for the highest return? If you look at some of our peers that you mentioned, as you know, Scott, pick one, JB is valued over$12 billion. It sat there with about a billion dollars on its balance sheet. vertical, we're sat here valued about 600 million. We've got$150 million on the balance sheet, good for about a year. They're valued 20 times more than us, yet our progress is very similar. We've got aircraft designs that are similar.

17:39We're flying full-scale piloted prototypes. They are valued higher because they've got a track record of raising money and cash on the balance sheet. I'm just starting that journey with vertical. We didn't raise any cash for three and a half, four years until December, January. And I'm gradually building up the balance sheet, hitting all the performance milestones we've said and building the credibility. And I think that puts us in a brilliant position to generate very significant returns for investors. I see a big part of that. Delta, quite frankly, is the two of the companies, Joby and Archer, are headquartered in the US and have that sort of technology halo.

18:15You guys are headquartered in Bristol. So talk about building an aviation and aerospace slash technology company in the UK versus building it in the US. I think the first thing I'd say is Silicon Valley hasn't certified any aircraft. And I love Silicon Valley in terms of the move fast, break things, etc. Unfortunately, you can't launch a beta product on a global stage. You might be able to do it somewhere in the Middle East, maybe. But to get this market really working, to make your business work, you have to get certified under Civil Aviation Authority in EASA or the FAA. They unlock the global insurance markets, which means you can sell the product globally.

18:59And that's how you get scale. So we are based in Bristol, which is the European hub of aviation. It's where the Concorde was designed and developed. We've got tier one aerospace suppliers all around us here. We've got great education and universities, Oxford just down the road, Bristol, Bath. We have incredible technology and capability right here. And we know how to certify an aircraft, which is the secret sauce from my perspective. and i think importantly on this moving fast i've been an incumbent in prior jobs in um automotive i don't have any of that incumbent baggage where i can't put my best people on it i can recruit the best talent from around the world to come here to bristol they know this aircraft works they want to be signing the fuselage of the first certification one and we are so focused on bringing it to market.

19:54We're not distracted by anything else. And that gives us an edge. It lets us move at a pace unrivaled in aviation. And remember, this is an aircraft we're building, but you've got to get certified. So we bring speed comparable to Silicon Valley, but we bring the knowledge of how to certify.

20:13We'll be right back. If you're enjoying the show so far and you haven't subscribed, be sure to give Prof.G Markets a follow wherever you get your podcasts.

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22:37We're back with ProfG Markets. What would prevent this from working? And, you know, I could throw out an example of something that pops into my head, and then I'd like for you to add some more. One thing that pops into my head is we have millions of flying taxis in the sky. How do we figure out how to make them not crash into each other? You talk about highways in the sky. How do we figure out a way to make sure that people can operate these vehicles and not crash? That's the first thing that comes into mind. One, is that legitimate? And two, what are some other things that would stop this from actually happening?

23:25In terms of what would make this not work and the highways in the sky, I guess I'll give you two examples. First, 20 plus years ago, I was working in automotive. Just trying to get a car to self-park was incredibly difficult because you've got children and dogs and old people and bicycles behind you. It was incredibly difficult because there's always things around the vehicle. If you look up in the sky, there is nothing there. All you need is a little transponder on the aircraft. They all talk to each other and they just stay apart. it's actually really easy to solve that staying apart once you're in the sky that is quite easy and it kind of links to the next generation which will be autonomy when again these things can like they can fly on their own and stay apart very very easy to achieve so i think you can get there and there is a route through that crashing etc it's not a massive technical challenge it's all there already in terms of regulation you know in another former role i uh i was um chief operating officer of a company called um international delivery systems the equivalent of the u.s postal service um as a foot it was a footsie 100 company now as part of that i did the first commercial drone delivery in the uk took about 18 months worth of negotiation with the uk government to let us do it, but it was front page news for kind of three or four days when we did it.

24:56So I've worked through the regulatory challenges of putting something in the sky. Analogous to that now is something called in the UK, it's called the Future of Flight Industry Group. It's chaired by the government in the UK. They put$30 million behind it. They've committed to the skies being open in 2028. And in the US, you have the Trump presidency recently issued instruction and executive order to the FAA to effectively do the same, to keep up with what regulation is evolving in UK, Europe, Korea, Japan, where there is a huge pull for this to happen. So, you know, you asked what are the things that could stop it?

25:37Regulation. But the whole industry is front-footed on that now. Complete change from two years ago when everyone was wondering how it was going to evolve. There is a massive push to get this up and running now, which is fantastic for the industry. So let's assume it does work, and let's assume it works fantastically. Let's assume full adoption of e-VTOLs. What would that do to the current transportation industry? What would that do to cars, trains, planes? And also, what would it look like in everyday life? Are we taking these vehicles to work? Are we taking them to go on vacation? What does a full adoptive world of EV tolls actually look like?

26:23I very much see this back to this highways in the sky. So yes, we will be using them on a daily basis. If you look at cities like Seoul, Mumbai, New Delhi, LA, where the infrastructure is creaking already, where people just can't get around in the cities, You can't build your way out of it. There's no space for roads. You can't tunnel your way out of it because it takes forever and is so costly. So everyone is looking to the skies. So this is the future of transportation. And as I said earlier, we already know and have got this current generation of the product to a cost point of$2 per seat per kilometre.

27:02so as supply chains grow as you manage to put more of these out there this has the ability to be mass transport you can easily imagine it taking it from one side of london into the city every day as a commute you could be you know my commute i'm sure scott you recognize this in london i commute about an hour a day that's seen as not a bad commute you could i'm only 11 miles out from the center you could do that in five minutes in one of these yeah you can have a local vertiport somewhere, fly straight into the center. It is truly revolutionary. And that is what we are all doing it as an industry.

27:40And I do think this is what we want to create. We want to create the industry here. We want the whole industry to thrive. And logistics and delivery. I mean, we're already starting to see Amazon delivering stuff to our doorsteps with drones. Will eVTOLs have a role to play in that story? Are we going to be seeing, are we going to be door dashing our burritos with these vehicles um i don't think we'll be door dashing them i think a drone is far better for that but in terms of bigger things yeah absolutely um one of the things i just launched recently i signed off 18 months ago a hybrid powertrain for the product because we have a large airframe what i mean by that is wingtip to wingtip fits on a helipad but the tube under it is bigger than our peer groups and we can move things more things so i signed off a hybrid powertrain that takes the range from 100 miles to a thousand miles it takes the payload from 600 kilos to 1200 kilos well all of a sudden you open up logistics now importantly military logistics is something that drops in very nicely to that hugely interesting from a military perspective because you've got silent takeoff and landing You've got a very low noise signature, a very low heat signature.