The Best Investment I Almost Never Made

Reflections on Archer Aviation’s Successful SPAC Acquisition & De-SPACing

It was April 30, 2020, and New York City was closed for business while we were all working from home and hunkered down. While I was not going to my midtown office, Central Park had become my new desk where I found myself taking multiple walks a day and having conference calls while walking around the Reservoir or Great Lawn to maintain some sense of sanity. I often joke that I spend 50% of my time looking at new investments, 50% of my time making new investments, and 50% of my time working with my existing portfolio companies and providing strategic guidance and advice. On that day, I received an email from a friend in the real estate development business that intrigued me:

Gregg, I want to take a moment and introduce you to a good friend and former colleague, Brett Adcock. Brett co-founded Vettery (Greycroft/Pritzker backed, etc.) which he sold for $100+mm in 2018. He and his co-founder along with Marc Lore (jet.com/Walmart) invested $11mm to start a new air mobility company, Archer.

They are now in the market with their next round of which they have a lead and are looking for value-add investors like you. I thought an introduction would make sense. If uninteresting, please just reply accordingly — no one’s feelings will be hurt.

Brett — I will let you take it from here

Have a great day!

-Emanuel

The Jetsons Dream

I did not know what to make of the email, but the “mobility” part got a hook in me because I have previously invested in many other Auto-tech and mobility companies, including Rodo, Via, Revel, Getaround, Lime, Bird, Proterra, and more. The “air” part intrigued me because I have been building a portfolio of many “frontier-related” investments, including in Astra, Axiom Space, Momentus, OrbitFab, and Relativity Space (which has become my third largest investment).

So, what did a New York real estate development friend who sent me this email, know about “air mobility?” I had to learn more.

Four days after receiving that email, I found myself on a Zoom call with the two founders of a company in “stealth mode” called Archer Aviation, Adam and Brett. I was sucked into a new world and learned about the potential future of “flying taxis,” or, in industry parlance, “eVTOLs,” which is the acronym for “electric vertical takeoff and landing” aircraft. It seemed like this Jetson’s dream was more than just a cartoon from my youth in the 1970s, but was becoming more of a reality that could be brought to life in the next several years.

My business takeaways from this call were the following:

• These were safer than helicopters because of the multiple blades
• These were 100x quieter than helicopters
• Electric! Green and no emissions
• They will be cheaper to operate and can eventually appeal to the masses
• Potentially flying in next several years
• There was a massive amount of capital pouring into the space
• 150 mph with a 60-mile range, which could improve with advancements in battery life
• Marc Lore

The Entrepreneur’s Entrepreneur

My other takeaway was that I was incredibly impressed with Adam and Brett — they were proven entrepreneurs, had a history of starting, building, and exiting a business, and making money for their partners, employees, and investors.

They possessed the perfect amount of scrappiness I so very liked, combined with a level of maturity in knowing how to execute — particularly in a regulated business in which lives would be at risk.

Lastly, they had successfully recruited and built a team of incredible folks filled with passion who had come from many other notable companies. I would say they were an entrepreneur’s entrepreneur, which is a great compliment. This is my way of saying they had those “McGeiver instincts” and could get through any situation.

My Concerns

The one concerning factor that I had to seriously consider was that this was a company that was going to require hundreds of millions of dollars more — far beyond this initial investment round’s size — to see this plan through to the Jetson’s dream. I have invested and worked with more than 60 biotech companies which generally have more binary-ish plans, so this was something I was comfortable investing in. I understood the upcoming milestones and how, if achieved, value should unlock and lead to additional funding.

At this point, I reflected on the meaning of “entrepreneur.” To me, if you boil it down to its core, a successful entrepreneur is a great salesman. They are constantly selling. Employees, customers, investors, and partners — they constantly are convincing employees to join the team, investors to give them funding, and prospective customers to execute deals with them. Of course, they need to have a great product or service, but selling is core. I have seen this talent in many other successful entrepreneurs, and I felt confident that this team would get it done.

Pulling the Trigger

I consider myself a “gut” investor and generally make an investment decision in the first 20 minutes of hearing a story and meeting a founder. Thus, the very same week I met the team on Zoom, I committed to investing. I knew I wanted to be a part of this journey. Was I crazy? When I shared that I was investing in a “flying taxi company,” I had family members and friends who thought I was kidding, and it seemed far too risky which, of course, gave me pause. However, I had the same reaction when I told friends I was investing in a “fake meat” company called Beyond Meat. “Yuck, what is that? Who will eat fake meat?” JUUL was similar when I invested in the company in 2015 as the JUUL was first being introduced to the market. Friends remarked, “It is just another one of those e-cigarettes and they have been around for a while and this is no different….”

As for Archer, when I made the initial investment, the only other investor I knew of was Marc Lore. I didn’t ask and, honestly, didn’t even know until after closing the Series A round that other notable investors like A-Rod and Greycroft had invested. I do not know if that would have influenced me one way or the other, and I always tell younger fund managers and friends to make their own call on the field and don’t focus or be influenced too much by co-investors. Many will debate me on this, but that’s my feeling.

Sizing The Investment

When making private, illiquid investments, one of the most important factors to weigh is sizing the investment properly. This is hard and I approach each investment with the perspective that I will probably lose my entire investment and, if I don’t lose my entire investment, I have to be prepared to live with this for the next five years or more. Those are the expectations I set for myself on each investment, whether I am investing in a Series Seed or Series D round. Hence, I weigh many factors in my head when determining whether to make either an “average” investment, “undersized” or “oversized” investment allocation.

At this time, the world was on fire with Covid and the macro-outlook was so very scary. In addition, the company had a long road ahead and I believed I would have multiple bites at the apple to invest in future rounds. So, I elected to make an “undersized” investment in Archer against the backdrop of these factors. To me, this meant investing maybe 50–75% of what I would typically invest in a company at this stage, while keeping dry powder for follow-ons. As I have come to learn, one can end up underinvesting in the winners and over-allocating in the dogs.

My bad, but some things will never change and, regrettably, I wish I made an oversize investment here.

What’s Next — Competition

There has and will continue to be a tremendous amount of investment in the eVTOL space and I would not be surprised to see competing companies seek liquidity events, like Archer. Joby Aviation — another eVTOL manufacturer — also went public via SPAC recently. This is not bad news but will create even more awareness for the sector and opportunity, which is exceptionally large.

Morgan Stanley calls for a $1.5 trillion market opportunity by 2040, so there is room for many players, and this is not a winner-take-all market. We witness competition in almost every market with strong players — we have Uber and Lyft, Bird and Lime, Beyond Meat and Impossible, and we will witness continued innovation and development and competition which will lead to greater options for consumers.

I am confident and fortunate that I have backed a winning team that has received buy-in from partners who are way smarter than me, including United Airlines and Stellantis (Fiat/Chrysler) who have formal relationships with the company and invested alongside me. I am excited for what is to come next.

The Lesson

So…the moral of the story is, you just never know where that next great investment opportunity may come from. Have an open mind, try to see the future, and ask yourself this question:

“Is there a place in the world for this product or business and can this team make it happen?”