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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