Business Blog: Universal Hydrogen’s final flight

Why Universal Hydrogen folded—and why the company's mission will live on

July 3, 2024

In 2023, Universal Hydrogen set a record when the company's 40-seater aircraft became the largest ever to fly primarily powered by hydrogen. But this week, the company announced it would liquidate, having run out of runway.

Yeah, I know. The jokey turns-of-phrase come easy when you're talking about an aviation company: They were flying high—and now they're grounded! The business model was up in the air!

But the news that Universal Hydrogen was shuttering left me rather sad. The dream of hydrogen-powered flight to me feels like one of those wonderful big swings that VCs are (theoretically) positioned to help fund and bring to fruition.

There’s a big problem to solve: The aviation industry accounts for at least 2% of global emissions, and many in the industry view hydrogen-fueled flight as the long-term solution for decarbonizing aviation.

"Hydrogen has unlimited promise," said Pasha Saleh, Alaska Airlines head of corporate development. "Start with the fact it's element number one on the periodic table. It’s the most abundant element in the entire universe. Having said that, it's very hard to handle. When the element is so small, what container can hold it? It actually slips through the walls of just about any container."

(Alaska's an investor in hydrogen-focused competitor ZeroAvia, which inked a conditional 100-engine deal with American Airlines just yesterday.)

And amid the AI boom troubled AI startups like Stability AI seemingly have little trouble getting lifelines from big-name investors, but Universal Hydrogen couldn't catch a break. The company was raising a Series B late last year that nearly closed—up until an anchor investor was unable to come up with the cash, two sources familiar with the matter said.

Universal Hydrogen explored multiple exit avenues, with airlines and other kinds of holding companies, but regulatory stresses and a ticking clock prevented a deal from getting done, the sources told Fortune. It likely didn't help matters that founding CEO Paul Eremenko stepped down in April 2024, per his LinkedIn.

"This broadly reflects that capital isn't always proportionate to technical merit or utility for civilization," said Peter Barrett, founder at Playground Global, which led Universal Hydrogen's Series A. "The technology works. There will be people who say that because the company failed, the technology was wrong—and that's the furthest thing from the truth. We can only make progress by sometimes having our reach exceed our grasp. This is a good example of that, but I'm unrepentant about picking that team. Hopefully, we'll get to see their technology in some form—that all of us can experience—at some point in the next couple of years."

Universal Hydrogen CEO Mark Cousin said that it "remains to be seen" who will purchase the company’s residual assets, which include the startup’s hydrogen fuel cell technology and intellectual property.

Universal Hydrogen's backers also include Toyota Ventures, Coatue, JetBlue Ventures, Mitsubishi HC Capital, Tencent, and Plug Power, according to Crunchbase.

The tragedy is that we're in a time of increasing cultural awareness of just how environmentally damaging flying can be. In Sweden, the "flight shame" movement has been a key cultural tension that even the country's government has sounded off on. In 2022, France banned short-haul domestic flights, citing concerns about carbon emissions. Even Taylor Swift has gotten into trouble over the emissions of her private jet.

And the problem is getting worse—the United Nations anticipates that airplane emissions of carbon dioxide will triple by 2050. There's a chasm between that reality and the laundry list of net-zero goals that airlines have laid out. Companies like Universal Hydrogen set out to bridge that gap—and others will now have to go on carrying that mission forward.

“This is an existential threat to the aviation industry and the future of the companies that make their business in it—and at the moment, nobody's taking it seriously," said Cousin.

A programming note…We're dark for the July 4 holiday, but never fear: Term Sheet will be back in your inbox bright and early on Friday, July 5.

This month’s cartoon…Here’s your July cartoon, by Ian Foley.

Happy Fourth,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Bright Machines, a San Francisco-based developer of robotics and AI-powered software for manufacturing automation, raised $106 million in Series C funding. BlackRock led the round and was joined by NVIDIA, Microsoft, Eclipse, Jabil, and Shinhan Securities.

- Sentient, a San Francisco-based AI research and development platform, raised $85 million in seed funding. Founders Fund, Pantera Capital, and Framework Ventures led the round and were joined by Ethereal, Robot Ventures, Symbolic Capital, Dao5, Delphi, Primitive Ventures, Nomad, and others.

- Axelera AI, an Eindhoven, The Netherlands-based developer of AI hardware technology, raised $68 million in Series B funding from Invest-NL Deep Tech Fund, the European Innovation Council Fund, Innovation Industries Strategic Partners Fund, Samsung Catalyst Fund, and existing investors.

- Exein, a Rome, Italy-based embedded IoT cybersecurity company, raised €15 million ($16.1 million) in Series B funding. 33N led the round and was joined by Partech and existing investors United Ventures, eCAPITAL, and Future Industry Ventures.

- Pieces for Developers, a Cincinnati, Ohio-based AI coding assistant, raised $13.5 million in Series A funding. Drive Capital led the round and was joined by Cintrifuse Capital, Redhawk Ventures, SVB, and others.

- Phaidra, a Seattle, Wash.-based AI-powered virtual operator of plants and other industrial systems, raised $12 million in funding from Index Ventures.

- Redactive AI, a Melbourne, Australia-based platform for building generative AI agents and applications, raised $7.5 million in seed funding. Felicis and Blackbird led the round and were joined by Atlassian Ventures and Zapier.

- Sensorita, an Oslo, Norway-based developer of waste management technology that can measure how full a garbage container is in realtime, raised $3.3 million in seed funding. Brick & Mortar Ventures led the round and was joined by Telenor.

- Cluby, a Helsinki, Finland-based marketing platform for restaurants, raised €2.9 million ($3.1 million) in seed funding from Vendep Capital.

- Vida, an Austin, Texas-based provider of AI voice agents for small to medium sized businesses, raised $3 million in seed funding. Stillmark led the round and was joined by Trammell Venture Partners, Ten31, Timechain, and Lightning Ventures.

- Gendo, a London, U.K.-based AI-powered architecture and design platform, raised $1.1 million in pre-seed funding. Concept Ventures led the round and was joined by Ascension Ventures, Baobab Ventures, and angel investors.

- SmarterLicense, a Los Angeles, Calif.-based licensing platform designed for any type of content, raised $1.1 in funding from Chris Camillo and other angel investors.

- Vortex IQ, a London, U.K.-based AI automation platform for e-commerce, raised $1 million in funding. Sure Valley Ventures led the round and was joined by Techstars.

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PRIVATE EQUITY

- Thoma Bravo took Everbridge, a Boston, Mass.-based platform designed to help organizations anticipate and mitigate damage from critical events, private for approximately $1.8 billion.

- Bluestone Equity Partners invested $20 million in Qloo, a New York City-based AI platform designed to predict consumer preferences in sectors like media, fashion, and travel.

- Aquiline Capital Partners agreed to acquire a majority stake in Isio Group, a London, U.K.-based pensions, reward and benefit and investment advisory company. Financial terms were not disclosed.

- Phenom, backed by OMERS and Almak Capital, acquired Tydy, a New York City-based preboarding and onboarding platform for employees. Financial terms were not disclosed.

- Prodieco, a portfolio company of Agilitas Private Equity, agreed to acquire GEMEL Precision Tooling, an Ivyland, Pa.-based provider of precision engineering tools for the life sciences sector. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

- New Mountain Capital, a New York City-based private equity firm, raised $15.4 billion for its seventh fund focused on control and control-oriented investments in companies in the life sciences, health care technologies, infrastructure, software, financial services, and other sectors.

- Seaya, a Madrid, Spain-based venture capital firm, raised €300 million for its Andromeda fund focused on energy transition, decarbonization, sustainable food chain, and other companies.

- The Westly Group, a Menlo Park, Calif.-based venture capital firm, raised $100 million for a new fund focused on seed investments in companies in the energy, mobility, building, and industrial sectors.

PEOPLE

- British Columbia Investment Management Corporation, a Victoria, British Columbia-based asset manager, hired Jon Salon as senior managing director and global head of healthcare for the firm's private equity program. Formerly, he served as president and CEO of MDLIVE.