The Importance of Funding Big Ideas in Aerospace

One of the most insightful panels that I attended during the Forum’s Annual Conference from September 18-20, 2024, in Huntington Beach, California, was titled “Funding Big Ideas in Aerospace.” The panel was expertly moderated by Sandi Knox, Partner and a founding lawyer of the Emerging Companies and Venture Capital Practice Group at Sidley Austin LLP. The panelists included Brian Craig, hearing officer and former assistant general counsel at the Financial Industry Regulatory Authority (FINRA); Ari Ruffer, counsel for Corporate Development and United Airlines Ventures; and Bart Biggers, partner and co-leader of Sidley’s Global Aviation and Airlines Practice Group. Together, they discussed obstacles to and potential solutions for funding startup companies that are developing promising innovative technologies for the aerospace sector. According to the panelists, areas of technological development most in need of investment include satellite development, drone design, and software and hardware to counter uncrewed aerial systems (UAS).

One challenge that the panel discussed is how to secure investment from more established companies like airlines to invest in startup companies. Biggers and Ruffer stated that a demonstrated commitment from startup companies to build brand recognition is crucial for attracting investment. Ruffer also mentioned that startup companies can help cultivate interest by demonstrating technological and government affairs expertise in their sales pitches to established companies. Relatedly, the panelists discussed the challenges of fostering effective collaboration among startup companies, investors, and established companies. The panelists noted that sometimes, collaboration can be hindered by differences in corporate culture and business strategy between startup companies and established companies. Nonetheless, these differences, according to the panelists, can be bridged if startup companies understand the needs of their potential investors. Ruffer mentioned that it is here where intermediary companies can help. These companies provide a degree of expectation-setting between startups and established companies to reduce differences in business strategy and corporate culture, and ultimately assist with getting new technologies into the market for the aerospace industry. The panelists cautioned, however, that intermediary companies should not have board seats on startup companies to avoid potential conflicts of interest.

Another topic of discussion was the role of the federal government in helping startup companies develop and bring their technologies to market. Knox noted that the federal government has a significant role in the success of such startups because the government’s financial incentives and regulatory schemes shape the development and marketability of new technologies for the aerospace sector. Craig mentioned that some federal agencies have flexibility to enter into contracts with companies for research purposes without having to comply with government contracting regulations. He suggested that this could be one way to bolster federal support of startup companies with potentially promising technologies for the aerospace sector. The panelists noted that the Inflation Reduction Act has also facilitated some investment in emerging aerospace technologies by providing tax credits to such companies. Ruffer stated, however, that additional federal investment is still needed because the credits are not enough for startups to raise sufficient capital. He noted that small investments and incentives can only take these companies so far and startups need investors who can devote billions of dollars to bring their technologies to market in the aerospace industry and incentives that facilitate the effective use of limited resources.

This panel addressed a topic that often does not get enough discussion in the aerospace sector—funding new innovations in the industry. The issues raised by the panel could be especially relevant for law students and new lawyers looking to practice law in the aerospace sector, whether in the private or public sector. As highlighted by the panelists, emerging aerospace technologies present important legal challenges and opportunities. Just as lawyers had to innovate government and industry systems to support the burgeoning commercial aviation industry nearly 100 years ago, it is likely that lawyers will need to adapt these systems again to help aerospace industry clients grow and innovate rapidly and responsibly. By keeping abreast of ongoing efforts to channel capital into startups with promising innovations for the aerospace industry, law students and young lawyers entering the sector can position themselves well to serve clients and, ultimately, the general public, by helping to develop solutions to get important new technologies to market.

For me, observing this panel provided a valuable starting point to begin considering how I might be a part of helping to create solutions during my career. Some potential areas for further discussion could include promulgating policies to encourage greater federal, and even state, government investment into companies developing promising aerospace innovations; giving startup companies affordable access to lawyers with expertise in regulatory compliance and experts in other fields necessary to further develop their technologies; and raising awareness of career opportunities in the aerospace sector and the financing of startup companies among US law.

The Forum is well served by having had a panel about this topic during its annual conference, and I hope that it spurs further discussion among stakeholders involved in technological development and venture capital investment in the aerospace sector.