Elroy Air Secures $40M to Advance Hybrid Cargo Drone
Elroy Air has secured a $40 million Series A funding round to accelerate the build, testing, and validation of its first autonomous cargo drone. The round included investment from Lockheed Martin’s venture capital arm, alongside Marlinspike Capital, Prosperity7, and existing backers such as Catapult Ventures, DiamondStream Partners, Side X Side Management, Shield Capital Partners, and Precursor Ventures. This latest injection brings the company’s total funding to $48 million since its founding.
The San Francisco-based startup, established four and a half years ago by David Merrill and Clint Cope, was born from what Merrill described as “this dual insight that the enabling technology was within reach, was here to build larger drones […] and that there would be a lot of useful things that larger systems can support.” That vision has materialized in the Chaparral, Elroy Air’s flagship autonomous cargo aircraft.
Kofi Asante, the company’s vice president of strategy and business development, characterized Chaparral as “a dual-use system,” designed to serve both defense and commercial markets. The aircraft is engineered for a 300-mile range and a payload capacity between 300 and 500 pounds. It integrates automated flight and cargo handling, reducing the need for human involvement not only in piloting but also in loading and unloading.
A defining technical feature of Chaparral is its hybrid-electric propulsion system. It combines all-electric propulsors with a generator and a turboshaft jet engine. The generator provides additional power during takeoff and landing—phases that demand high energy output—boosting rotor performance without relying solely on current battery technology. Merrill explained, “What we heard from our customers was that they needed longer routes, longer-range missions than what today’s battery technology can actually support. It became pretty clear to us that we needed an alternative supply-side power plan on a vehicle.”
This approach sets Chaparral apart from eVTOL passenger aircraft makers like Joby Aviation, which are constrained by battery energy density for longer missions. By incorporating a hybrid system, Elroy Air aims to bridge the gap between short-range electric drones and traditional fuel-powered aircraft, offering extended operational reach without sacrificing efficiency.
Another notable innovation is the separation of the cargo pod from the main airframe. Using GPS and onboard sensing systems, Chaparral can autonomously pick up and drop off cargo pods. This design enables ground teams to focus on packing and staging while the aircraft handles the transfer process, improving turnaround times and reducing exposure in hazardous environments. In defense contexts, such as resupplying troops in contested areas, this automation could mitigate risks to pilots, crews, and cargo handlers.
Merrill noted a broader shift in military logistics: “More generally, there’s this interest across the national security community of having logistics be more nimble and automated, and this shift from big expensive aircraft that you don’t have very many of to smaller, lower-cost aircraft that you can have more of.”
The company’s near-term roadmap includes flight validation with the U.S. Air Force and Navy under a Phase 3 Small Business Innovation Research contract awarded through Agility Prime. These trials will test operational capabilities in real-world conditions and are scheduled to begin next year.
On the commercial side, regulatory pathways will influence deployment timelines. Elroy Air anticipates that operations could commence in international markets with more flexible aviation standards before securing U.S. Federal Aviation Administration approvals. To operate domestically, the company will need both a Type Certificate for the aircraft and a Part 135 certificate for commercial cargo operations. The business model remains adaptable, with the option to sell Chaparral systems to third parties or to operate them directly as a cargo airline.
Merrill framed the company’s ambitions within a broader industry trend: “The space of drone delivery has risen up quickly with small last-mile drones […] and now this new chapter is opening for middle-mile [cargo delivery]. We’re excited that the technology is ready to support this, customers want it, and we’ve built a team and assembled the funds to go after it.”
