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Baillie Gifford, one of the UK’s largest private investment managers, has taken a nearly 4 per cent stake in German electric aviation start-up Lilium, valuing the five-year-old group at just over $1bn.
The $35m investment in Lilium, which aims to fly an all-electric, five-seater city-to-city air shuttle by 2025, is the Scotland-based fund manager’s second in the urban air mobility sector. Baillie Gifford is also an investor in Lilium’s California-based rival Joby, which in January closed a $590m fundraising led by Japanese carmaker Toyota.
Michael Pye, investment manager at Baillie Gifford, said that the Joby stake was the smaller of the two, adding that the fund manager was interested in “situations where there is the potential for a really transformative new market or product in the long term, while recognising that these will often take a lot of time to come to fruition.”
He said that Lilium’s concept of an affordable air shuttle, which due to its vertical take-off and landing technology requires little more physical infrastructure than a concrete landing pad, could transform regional transport.
Nevertheless, there is still no guarantee that either Lilium or Joby will succeed in delivering their products to market, and Mr Pye acknowledged that there could be “speed bumps” along the way. However he said that Baillie Gifford, an early investor in Amazon and Tesla, preferred to back “entrepreneurial teams that have long-term vision”.
The Baillie Gifford investment, made through its flagship fund Scottish Mortgage Investment Trust, comes barely three months after the Munich-based aviation group raised $240m from existing investors led by Chinese technology group Tencent. At the time the company said it had enough to fund itself for a year.
In total Lilium has raised $375m in two funding rounds, substantially less than Joby’s $720m. The total also falls short of the $500m Lilium was reported to be seeking last year, as the pandemic creates an increasingly challenging environment for start-ups.
Baillie Gifford’s decision to invest comes as a big boost for the aviation company, according to its finance director Christophe Delbrück, who called the investment manager “partners . . . who will give us credibility in the outside world”.
Daniel Wiegand, chief executive and co-founder, said investors were beginning to understand the differences between the business models in the urban air mobility sector. There are currently more than 200 projects being developed around the world, he said, pointing out that the economic impact of Covid-19 was likely to “drive consolidation in the sector”.
Lilium’s business plan has not been hindered by the pandemic so far, he added, with about 400 staff working from home and a further 50 on site running the testing programme.
The company is developing an aircraft that has fixed wings with 36 rotor fans that can tilt downwards for vertical take-off and then forwards for flight. The extended fixed wings give the aircraft extra lift, which allows it to reach a range of 300km.
Lilium aims to begin producing aircraft for certification around 2023.
This article has been amended since publication to clarify that Baillie Gifford’s investment was made though its flagship fund Scottish Mortgage Investment Trust
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