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October 15, 2024

German startup founders and investors call on federal government to support struggling air taxi startup Lilium

The company faces insolvency if it doesn’t soon raise more capital

Struggling air taxi startup Lilium, which faces insolvency if it doesn’t soon raise more capital, has been in talks with the German government about the possibility of receiving state support for over a year — a lifeline that is now off the table, reported Der Spiegel yesterday.

In response, over 650 founders and investors — and counting — have come out in support of a federal guarantee for the Bavarian startup, having signed an initiative called “Enable loans for Lilium, strengthen Germany as a deep tech location”. 

The signed names include founders such as Daniel Metzler, cofounder and CEO of Isar Aerospace, Bastian Nominacher, cofounder of Celonis and Miriam Wohlfarth, cofounder and CEO of Banxware, as well as Verena Pausder, the chairperson of The German Startup Association.

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In a press release, the German Startup Association makes clear that if Germany wants to compete globally, it needs to back startups working on innovative deeptech technologies.

“We want to make our country a globally leading deep-tech location by 2030. This area is capital and research intensive, but it is here that the future of Germany as a location for innovation will be decided,” the association said.

Looking for a lifeline

Lilium, with early backers such as Atomico, Earlybird Venture Capital and Tencent which listed on the Nasdaq via a SPAC in 2021, has been in discussions with the federal government and the Free State of Bavaria since last year about the prospect of securing $100m in loan guarantees.

The German state of Bavaria has already agreed to support the company with a loan of €50m, but that is dependent on the federal government also agreeing to contribute the same amount.  That looks likely to fall through because of resistance within the German Bundestag from members of the budget committee, according to Der Spiegel.

In Lilium’s latest accounts, the company said it has secured commitments of approximately €32m from existing investors ‘to meet the immediate liquidity requirements’. However, securing some of the money will depend on whether the federal government chooses to support Lilium with state aid.

For the German Startup Association, the decision to support Lilium hinges on whether Germany is prepared to offer new technologies real growth prospects, even under challenging circumstances.

“Political decisions should not only take into account the consequences of action, but also the consequences of inaction,” said Christoph Stresing, managing director of the startup association in a statement.

“In the case of Lilium, this means that if the federal government does not grant the €50m guarantee in question, this would probably not only result in the literal collapse of the company itself. Rather, there would be a risk of lasting damage to the reputation of Germany as a deep-tech location, the long-term costs of which are difficult to quantify,” he said.

In a LinkedIn post on Monday, Lilium CEO Klaus Roewe wrote the company wants to receive a fixed-rate loan of €100m as a signal to its investors that Germany supports the entry into electric aviation.

“It is not about rescuing a crisis-ridden company with lost subsidies,” he said.

“The loan is fully repayable, the conditions are very advantageous for KfW [the German state-owned investment bank], and thus for Germany, and it is highly likely that this will mobilise further private investor money from home and abroad.”

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Miriam Partington

Miriam Partington is a senior reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn