22 minutes on YouTube could have saved investors $100M. That’s the harsh lesson from the rise and fall of Universal Hydrogen. Every hardware startup failure is a lesson too valuable to ignore. So, what can we learn from Universal Hydrogen’s downfall? Let’s break it down.
What Was Universal Hydrogen?
Universal Hydrogen (UH) set out to revolutionize aviation with capsule modules designed to safely store liquid hydrogen and act as modular fuel tanks for aircraft. The vision was bold: retrofit propeller aircraft with these hydrogen tanks and fuel cells. The startup had a stellar founder—Paul Eremenko, a former CTO of Airbus—and managed to raise around $90-100M. It had its first test flight, and then, last month, UH went bankrupt.
I don’t know the inside story of UH, but from where I’m sitting, the reasons for their failure are clear from. Here’s where the red flags were, using my system for evaluating startup scalability.
🚩 Red Flags All Over
1. The Climate Relevance Test
Yes, aviation is responsible for almost 2% of global emissions, so it passes the Bill Gates test - removing 1% of CO2 by 2050. UH however seemed to be targeting only propeller aircraft. These are responsible for 10-15% of all commercial air traffic. So even if UH succeeded, it would have mitigated an irrelevant amount of CO2. Should’ve been a non-starter immediately.
2. Does It Work?
Universal Hydrogen promised a quick scale-up, but several critical product and technology issues should have raised eyebrows:
- Volumetric Density: Liquid hydrogen’s volumetric density is four times smaller than jet fuel. This means you need four times as much hydrogen to cover the same distance, resulting in 15-40% less space on the plane for passengers or cargo.
- Energy Efficiency: Hydrogen’s energy efficiency is abysmal—about 22-23% from production to engine for a propeller aircraft, compared to 56% for batteries.
- Infrastructure Readiness: Green hydrogen production is virtually non-existent today. Almost all of the 100 million tons of hydrogen produced annually is gray. Building the necessary infrastructure—from wind turbines to electrolyzer and liquefaction plants—would be a massive and costly undertaking.
3. The Business Case
Here’s where it really gets interesting. If the previous points didn’t scare off investors, this one should have:
- Retrofit Costs vs. Benefits: Retrofitting propeller planes with hydrogen tanks and fuel cells means airlines would have to pay for the retrofit, lose 15-40% of passenger capacity, and somehow be happy about it? With airlines operating on thin EBITDA margins of 10-15%, this is a hard sell. Low-cost carriers, who might have slightly higher margins, are unlikely to be interested in retrofits.
- Market Potential: When was the last time you flew on a propeller plane? These account for only 10-15% of all commercial flights, making for a very small Total Addressable Market (TAM).
Lessons Learned
So, what can we learn from Universal Hydrogen’s failure?
1. Technical Characteristics Matter: Always do a thorough energy efficiency and size/weight calculation. Compare your product to existing solutions. If it’s bigger, heavier, or less efficient, you need a compelling reason why customers would choose it—and the fact that your product is “sustainable” isn’t enough.
2. Check Infrastructure Availability: Is the necessary infrastructure already in place? If not, when will it realistically be built? If someone is already pouring concrete, risks are lower. If not, think twice.
3. Understand the Customer’s Perspective: Why will they buy your product? Don’t rely on “green” or “sustainability” as your main selling points. Check if your customers have the cash, or if there are laws and regulations forcing their hand. If penalties for non-compliance aren’t severe, they won’t care.
4. Watch YouTube: Sometimes, the simplest answer is just a Google search away. Someone out there might have already posted a video or article explaining why your idea is flawed. Like this video posted around the time UH was launched—it could have saved investors $100M if they’d watched it.
Here is this video, which I’ve used for most of the above figures. It was published in 2022 and takes just 22 min to watch on 1.25x speed: https://h2sciencecoalition.com/blog/hydrogen-in-aviation-explainer-video/