Personal aviation is awesome!

Aviation has been a source of inspiration and a symbol of innovation since the Wright brothers’ first flight at Kitty Hawk, to Neil Armstrong’s first steps on the moon, to today’s dreams of colonizing Mars.

Unfortunately, it’s been very hard for startups to make money in aviation. Even the Wright brothers did not do particularly well in business.

But things might be changing. Today we sit down and talk with Tasuku Nakai, co-founder of Tetra Aviation, and we discuss how public research incentives, support from the aerospace giants, and the changing infrastructure needs might have just tipped the balance to startups.

It’s a great conversation, and I think you’ll enjoy it.

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Show Notes

  • How Tetra’s eVTOL aircraft came to be and what it might become
  • The steps needed to bring a new aircraft to market
  • Why it’s so difficult to innovate in aviation
  • The main hurdle in expanding the personal aviation market
  • Fundraising strategies and exist options for aviation startups
  • When investing is considered “evil” in Japan

Links from the Founder

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Transcript

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me.

Today, we’re going to talk about flying cars. That’s right, flying cars.

We sit down with Tasuku Nakai, co-founder of Tetra Aviation and we talk about what it takes to bring a new aircraft, especially a new personal aircraft to market, and it’s not easy. The Tetra Aircraft is an electric vertical take-off and landing, or VTOL aircraft, which they believe will form the backbone of a new aerial intercity transport system.

You know, I have a real soft spot for these kinds of startups. I have a private pilot’s license and I love the idea that the age of affordable personal aircraft might almost be here.

But as I mentioned, it’s hard, and as Tasuku explains, these kinds of companies don’t fit the traditional VC model for a number of reasons. We also talk about the possible business models open to aircraft startups, the release of Tetra’s new prototype, and the crazy world of experimental aircraft pilots who fly newly designed aircraft as a hobby.

But you know, Tasuku tells that story much better than I can, so let’s get right to the interview.

Interview

Tim: So, I’m sitting here with Tasuku Nakai of Tetra Aviation who makes personal electric aircraft, so thanks for sitting down with me.

Tasuku: Thanks for inviting me, Tim, and this is a really great moment to introduce myself and introduce my business.

Tim: No, the pleasure’s all mine. I think what you guys are doing is really interesting and I’ve had a passion for, like, aerospace startups for a long time, so actually, I mean, you can probably explain what Tetra Aviation is and what the product is better than I can. So basically, what are you building?

Tasuku: We are building personal electrical VTOL aircraft, so vertical take-off and landing, so wherever you want to come, just simply ride on it and fly to the air and arrive on your destination exactly.

Tim: And we’ll talk about the history later. This is kind of like the flying cars that startups have been teasing us about since the 1950s, but what you’ve built, is it considered an airplane or a helicopter, or a drone, or how is it classified?

Tasuku: Well, a really difficult question about that. There’s no category anymore. There’s a lot of class, almost 50 or 60 classifications, but basically, you think it’s similar for helicopter and the drone, to combine the helicopter and drone, so I mean, the people can ride on it and also, it has a distributed propulsion system as a drone has.

Tim: Actually, just today, you guys released this really cool video of the prototype.

Tasuku: Mm-hmm, yes.

Tim: Yeah, and we’ll put a link of that up on the site cause it’s really cool, but I’ve noticed like the prototype, the video you released still has unmanned piloting. Are you still doing unmanned or have people been able to ride it and fly it yet?

Tasuku: Oh, yes, we are still doing unmanned flight for this model, and we’re building up a manned flight aircraft for next model.

Tim: Okay, well, actually, let’s back up a bit. Developing a new aircraft is a lot more complex than developing a new HR system or developing new business SaaS.

Tasuku: Yeah, that’s right.

Tim: So what is the process? I mean, where are you in development? You’ve won several awards already for the work but where are you now and what steps do you have to take until we have people able to ride these?

Tasuku: What we have to do is make a culture or some custom about riding on those kinds of aircraft, eVTOL for next transportation network, but first, what we have to do is building an actual product that people can actually onboard. To do that, we mitigate the risk of people’s fear about riding on it or flying over your head, so we have to build some trust about making fine things in the market.

So what we do is first of all, there’s no injury is most important parcel. Starting from the unmanned flight basically and also the development is continue to no person onboard, so with that credit, we can put on some test pilot on our aircraft who are willing to collaborate with this experiment, not a special test pilot, but they are willing to collaborate with our aircraft in a more general way. So we are focusing on experimental aircraft market.

Tim: In terms of like the time frame, you guys started Tetra Aviation three years ago?

Tasuku: About two year ago, two years and three months.

Tim: Oh, okay, so it took like a little over two years to get from concept design to an experimental aircraft. From this stage, how long will it take before we can get, like you’re saying, people piloting it as an experimental aircraft? Is that happening next month or is that a year away?

Tasuku: Oh, we are planning to introduce our aircraft next year, showing off in the experimental market, get interest from test pilots, so we’re planning to put our aircraft into the exhibition at Oshkosh AirVenture next year, and there’s lots of people who have a similar spirit of ourselves and they are aviator and the airmen out there, so I have to introduce myself and introduce our product and introduce the feeling of what our aircraft does. Someone said yes, someone says no about our product, but those critics help, I think.

Tim: Yeah, I mean, that makes sense. I mean, it’s a much slower process but it’s basically the same user feedback process that all startups go through. One thing that’s surprising to me, so taking a little over two years to go from concept to prototype, and then another, let’s call it a year from a prototype to beta users, the experimental users, that’s not that long of a product cycle. That’s pretty fast, and yet innovation in aircrafts seems to happen very, very slowly. We talked before about flying cars and how, like, startups have been teasing us about flying cars for the last 70 years. Why is it so difficult to innovate in aerospace or in aircraft in particular?

Tasuku: I think it’s very difficult to think things integrated into one piece which is flying. Also, there is lots of restriction about getting certified to say this is safe. Other products, even mobility, for example, e-bikes or the electric car is a bit different from those white restrictions, safety restrictions are much more harder than those products.

Tim: So there’s two things in there you mentioned. I’m curious because you mentioned, like, the real technical challenges of all the pieces that have to work together and kind of the regulatory challenges. So actually, when we think of, like, satellites and aerospace startups, there’s a lot of innovation going on in satellites, a lot of startups doing that, but you would think that aircraft would be simpler to make than spacecraft. Is that the case or is the aircraft actually more difficult?

Tasuku: It’s a very difficult question about that. I think that satellite has, there’s a lot of methods out there. Recently, even in the university, there is CAN-SAT that is a sophisticated structure product that the university students can learn how to develop those kinds of things into a real product, and also, there is actual know-how connected to the actual products in this commercial market, in the satellites market, but there’s lots of people involved in aircraft, it’s not connected to the prototype in the university, I think, and also, it’s not connected to the actual product in the general aviation market because lots of big companies are building their product but there’s no experimental things that people or young men or others can learn about, well, aircraft things more easily.

Tim: So it’s just harder to get started with it?

Tasuku: Yes, yes, this are very few opportunities to get started with making a new aircraft, but the experimental aircraft culture can learn to follow this and learn about new things, but that’s not so much has a market. For now, the drones and eVTOLs are more closely connected to the Internet, involving lots of people. So recently, it’s more friendly and there is more chance to connect to the commercials. That allows people to get into it, so there’s lots of startups data recently building eVTOLs.

Tim: Oh, so I haven’t really thought of it, so it’s not necessarily the technical challenge, it’s just that the ecosystem for satellites and aerospace is much better developed than the ecosystem for aircraft?

Tasuku: I believe so.

Tim: We were talking about the experimental aircraft market, the pilots who fly experimental aircraft. How big is that worldwide?

Tasuku: That market is basically based in the United States only. They are very different from the other markets, especially Japan, there is no market but experimental aircraft, like Oshkosh events out there. Well, there are a few, but I think many people are already, they own their experimental aircraft but they are selling their aircraft because the restrictions in Japan are not so friendly for building aircraft compared with the United States.

Tim: So the purpose of the experimental market really is just to get people using it to get feedback to move to the next stage production?

Tasuku: Yes, I think those cultures are more friendly to building and riding on aircrafts.

Tim: So looking into the future, when we have, and I’ve gotta say, the video is awesome just to watch, it’s really cool. So when we have these personal aircrafts, how does that work in practice? I mean, I’ve got a private pilot’s license and it’s hard, it takes a lot of time and a lot of study, and a lot of practice to learn how to operate this. Would the people operating these still need to have pilot’s licenses or would something change? Was their software guidance for something?

Tasuku: Our final goal is a full autonomous flight, which is there is no reason to have a license because a computer can solve those problems at all, but I think that some part initially is necessarily to have human controls or a human can communicate with the radio center, so at the beginning, it’s necessary to have a license. Well, for example, the car has minor transmissions now, automatic transmission out there which is the machine can help people’s behavior in some aspect, and this is always happening in every machine, for example, even ships have a lot of sensors and control systems for the captain. They no longer have to control it by themselves. They are always controlled by the digital systems which is included in the aircraft already. So the machine and the software, and AI can help people control, I mean, so license is much more easier than today, I think.

Tim: That makes sense and I guess we have to do that with any kind of mass adoption, but actually, a number of people have told me that AI-piloted flight is actually a much more simpler problem than AI-driven cars.

Tasuku: I think in air, there’s nothing out there.

Tim: Yeah, yeah, there’s not, like, children running out in the street and there’s not strange unpredictable things happening.

Tasuku: Yeah, yeah, that’s right, that’s right, there’s no obstructions to fly. So it’s much easier.

Tim: And is that something that Tetra Aviation is also working on, the AI-powered flight, or is that something that other companies are working on that you will adopt later?

Tasuku: Yes, our company is doing full autonomous flight research now, but that’s not making some kind of best way. We are creating just at least a way to fly for autonomous because there is no certification or I guess regulatory conditions about full autonomous flight, so if we put our research deep into that, it’s probably difficult to adopt new regulation conditions or other countries’ architectures, and making a market in aviation, I think this is very difficult.

So what you can do is autonomous flight but its basic functions on it which produces the best flightpath or control systems, or location about the landing or taking off, so not much to keep entering through it, it’s just making ways to function on it.

Tim: Okay, and so kind of the vision of this would be eventually someone would use a Tetra Aviation machine by just entering their destination and the aircraft would just get there, take off, get there, land on its own?

Tasuku: Yeah. When you want to just come to devices here and ride on it and leave it there, and just fly back to the next destination.

Tim: That’s like a really awesome vision, but it seems like there is some really big technical and software challenges that have to be overcome before we get there. What is the timeframe? How many years away are we from that vision becoming reality?

Tasuku: Oh, I think it’s partially in the next five years, there is happening, I think. Partial autonomous flight will start in the next five years, I think, but full autonomous flight in the common market probably takes more than 10 years because even if the technology allows to produce those flights, but people cannot accept that service is flying above your head, so the market growth is not only for users but also environment is important too.

Tim: That’s true, there is a whole regulatory framework, a whole lot of different laws and regulations surrounding this where pilots have a lot of restrictions about where and when they could fly, and are governments debating this now? Are they thinking about how they could open up corridors, areas of the city or the country to allow these kinds of autonomous flights?

Tasuku: Some experimental places allow to fly autonomously. In the United States, I don’t know but some Air Force have this airspace, and the Chinese government also allows to fly for autonomous flight, I think, and some other countries allow full autonomous flight for restricted areas. A few Japanese companies have done autonomous flight for their restricted area, so gradually, many countries allow those experimenting in very restricted areas, but it depends on the market or the culture of those countries.

Tim: Well, actually, let’s talk about the business model itself. So the technology is incredibly interesting and endlessly fascinating, and I think the fact that there are big problems to solve make it that much more interesting, but in terms of the business model, what is the use case, what is the killer app for personal aviation of this kind? Is it commuting? Is it, I mean, as you said before, the experimental aircraft market is not, it’s not really a market, it’s a handful of passionate pilots, so who will be, how will this be used in widespread use?

Tasuku: We are focusing on the very busy businessman who are sometimes using private jets, and for those people, we are building, so very busy businessman to meet people in actual places, that’s a very common market, but most far today, taxicabs are participating in it sometimes, there is a need to get those times more shortened, so we are focusing on that those businessman will use our product.

Tim: So it would replace things like helicopter taxis between airports or short-travel private jets, this kind of thing?

Tasuku: Well, I think there’s no replacement for those businesses because the helicopter can carry lots of people and private jets also are more than four passengers, I think, so a company with lots of people, aviation industries, helicopters and private jets help those people. But our product is more distributed for personal use cases of single man so there is no replacement but we are just creating a new market to connect a traditional transportation network to the next transportation network.

Tim: Okay, so what is Tetra Aviation’s exit strategy? Is this, like, 10 years from now, are you planning on going into mass production and producing thousands, tens of thousands of these personal aircraft? Are you planning on licensing it to established aerospace companies? Are you planning on getting acquired by an established aerospace company? How do you see things playing out for Tetra Aviation?

Tasuku: We want to become a manufacturer who is responsible for the personal eVTOL market and we, well, hopefully, we just simply get IPO to the market.

Yes, we want to produce 2000 aircraft a year in 2030s and this is much more large than the helicopter market, so we are focusing on the mass production in 2030 to produce transportation services as well.

Tim: We talked a little bit about this before but since the path to profitability, the path to scale is 10, 15 years for a company like Tetra, it makes it very challenging to raise money. Most VCs aren’t interested in investing in a company with that timeframe. Have you had challenges raising money because of that timeframe?

Tasuku: Yes, because we have a long development, so most VCs have a time period of 10 years or five years, so they are willing to get a shorter type of thing, so it’s not similar for another software company. Our company has to take a longer time to get the capital gain for VCs.

Tim: Yeah, if your business plan is longer than the life of their fund, that makes it harder for them to invest.

Tasuku: Yes, so we have to find some visionary firms that allow us to develop a longer range of development.

Tim: And where have you been finding those? I noticed you have won awards in innovation competitions with Boeing and Pratt & Whitney, so what kind of organizations share that long-term vision and have been investing?

Tasuku: For example, a car manufacturer or an aircraft manufacturer has a long-term investment because they already have their businesses, when they want to develop their business, but investment of a company like ours, they didn’t care about the money back in 10 years, but they are focusing on the next 30 years, or yeah, more than the 30 years.

Tim: I guess it makes sense too because those kinds of organizations would have the ability to evaluate a highly technical product like your prototype where most VCs – well, most people would not be able to make a judgment about whether it’s viable in 10 years or not.

Tasuku: That’s right, and probably, some part of our technology will help their businesses in researching or the development process, so from that aspect, it is also to help get willing to make an investment.

Tim: Okay. Hey, well, listen, Tasuku, before we wrap up, I want to ask you what I call my “Magic Wand” question, if I gave you a magic wand and I told you that you could change one thing about Japan, anything at all – the education system, the way people think about risk, their attitude towards innovation – anything at all to make things better for startups and innovation in Japan, what would you change?

Tasuku: Oh, that’s a very difficult question. Well, I think I want to make, change the people’s minds that money is evil. People in Japan think that my investment or something earned, a new technology or getting well is some aspect they think is evil.

Tim: Really?

Tasuku: I believe that that mindset will change, that investment is more common and there’s lots of new technology and people are willing to make new things in Japan. There are lots of visionary persons who can.

Tim: So do you think people have been, like, skeptical of successful investors because certainly, business in general has a very positive attitude in Japan. There’s lots and lots of family businesses and restaurants, and that has a very positive attitude.

Tasuku: It’s a bit different – yes, they’re positive about that, I think, but I think that they think working is good, but successful earning is troubling, it’s an evil aspect, I think. Because they work hard, they earn money. There are some excuses to have earning success.

Tim: So you are saying that some people look at, say like, venture capitalists and investors, and say, “Well, they didn’t really work that hard, they don’t deserve that much money”?

Tasuku: Yes.

Tim: Oh, okay.

Tasuku: Well, working hard is a good part of Japan culture, but nothing serious about working, just enjoy your vision and get involved with other people, and make new business and earn money is an important thinking way. I think that’s very common in other countries, for example, in United States, it’s very important thinking about that.

Tim: Well, no, I think that it is really interesting, like just in the last 10 years or so, there has been a lot a very successful relatively young startup founders, people in their late 20s or early 30s who made millions of dollars with a successful startup, and yeah, I do think that that’s a new thing in Japan and I guess a lot of people are kind of trying to figure out how that fits in.

Tasuku: Yes, your example is right, I think, even the very young talented, there’s always some training time that’s necessary to get involved in the common business market, but I don’t want to say that money is the only thing that you’re going to start the business with, but I don’t want to say the money is always good, but I’m suggesting that it’s not evil but you should use or think of a better way to think about money.

Tim: Do you think it’s changing? Do you think Japanese attitudes are improving and being more flexible in their attitude towards money now or do you think it’s going the other way and people are getting more conservative about that?

Tasuku: The culture is gradually changing, I think, so well, there’s no need for a magic wand anymore but yes, we are thinking about, some things make more easier or something makes things better with technology and without training, so making new technology helps with those technology, ease of good things.

Tim: Yeah, that makes sense and as we see more and more successful helpful technology brought forth by startups, the more people will start thinking that way and seeing it as a good thing.

Tasuku: Yes, and also, ecosystems are gradually growing in Japanese market, so people who want to help other people, there are investors that give money and it helps other people with your technology or with your visions, so there’s lot of opportunities and chances growing in the Japanese market.

Tim: Yeah, I think it’s incredible to watch right now, there’s just so much amazing things going on.

Tasuku: Yeah, that’s right, that’s right.

Tim: Hey, well, listen, Tasuku, I want to thank you so much for taking the time to sit down with me today, I really appreciate it.

Tasuku: It’s my pleasure, thank you, it’s great.

Outtro

And we’re back.

All successful founders are a mix of the impractical visionary and the efficient pragmatist.

There is no perfect mix. It’s just a matter of style. The visionaries usually fail but they are also the ones who change the world when they do succeed, while the pragmatists make more money on average by launching another B2B SaaS company or an Uber-for-X startups.

Tasuku and the team at Tetra definitely lean towards the visionary as have the founders of personal aircraft startups since at least the 1950s. I mean, I remember, as a visionary high school student, reading Popular Science magazine and being enthralled by the ads for the personal helicopter kit that you could assemble yourself; the Scorpion Too!  Of course, my mother, pragmatist that she was, made it perfectly clear that I would not be ordering one even if I did somehow manage to save up the money.

The visionary in me still dreams of a world full of private aircraft, but the pragmatist is getting less and less sure about it. I mean, seriously, hundreds of people landing aircraft with four downward-facing propellers on busy streets, well, it raises certain safety concerns.

As a society, we have given up on the idea of the jetpack, but the dream of a flying car is stubbornly persistent, and someday, we might just get them. In fact, Tetra is just one of several Japanese electric VTOL aircraft startups, and much like Tetra, they are all finding a short-term business model elusive.

There is no question that there is amazing technology being developed here, and so it’s no surprise that many large aerospace companies are investing in the startups. There is something very important going on right now but the visionaries are going to have to spend a little more time with the pragmatists to bring it to market.

If you want to talk more about flying cars and I mean, come on, I know you do, Tasuku and I would love to hear from you, so come by DisruptingJapan.com/show172 and let’s talk about it. If you leave a comment, I guarantee, Tasuku or I, or maybe both, will respond, and hey, if you get the chance, check us out on LinkedIn or Facebook, but even better, if you like the show, tell people about it. Disrupting Japan is my labor of love, it’s free forever and we have no advertising budget. People hear about the podcast because listeners like you enjoy it and they tell their friends about it.

But most of all, thanks for listening, and thank you for letting people interested in Japanese startups and innovation know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.