Only a few months ago, Outbound Aerospace was on its way up — literally — after raising more than $1 million in pre-seed funding and flying a prototype meant to pave the way for a blended-wing passenger jet. But now the Seattle startup’s fortunes have fallen back to earth.

Outbound’s co-founder and chief technology officer, Jake Armenta, announced on LinkedIn last week that the company was shutting down. He joked that the news would be greeted with celebration by “competitors such as Boeing, who have been rightly terrified of us.”

During an interview with GeekWire, Armenta took a more serious tone as he discussed why Outbound fell short: “The simplest answer is that we ran out of money, and hadn’t really secured customer commitments that were strong enough to secure the next stage of investment,” he said.

Armenta said Outbound was caught between its initial strategy to create a different kind of passenger aircraft and an evolving strategy to start out building drones for military customers. That commercial-to-military pivot is an option many aerospace startups are considering as the prospects brighten for programs including the Golden Dome missile defense system, next-generation drones, tactically responsive space systems and hypersonic air vehicles.

“We didn’t really plan on being a military vendor,” he said. “But I have a background in Boeing Phantom Works, and I spent a lot of time working on drones at Boeing … so I know exactly what kind of things the U.S. government’s looking for. In that regard, we were able to put together a pretty compelling kind of platform.”

Outbound’s team came up with a drone concept called the Gateway UAV, which closely resembles the 22-foot-wide, blended-wing prototype that was tested in March. Gateway would fly rapidly deployable “mission containers” that could carry cargo or a suite of sensors for national security missions.

Armenta said the concept attracted significant interest from potential military customers. “But the U.S. military is a slow customer to work with, and the truth is, they prefer to work with companies that are very well funded,” he said.

Unfortunately, Outbound was not that kind of company in the summer of 2025. The company had raised $1.3 million dollars in total investment — including $500,000 from Blue Collective, a matching amount from Antler, and the remainder from smaller private investors. But even $1.3 million goes only so far.

“By pivoting away from the big aircraft, we lost the interest of some of the initial investors who were really wanting to do big moonshot projects,” Armenta said. “And then the investors who wanted to invest in military drones wanted to see a lot more traction than we had.”

Outbound CEO Ian Lee told GeekWire that the company faced a “chicken-and-egg” problem.

“We got stuck with DoD customers who were saying, ‘Hey, this is amazing. We want to see it demoed. And then we can write a contract, and contract equals dollars,'” Lee recalled. “So, then we turned around and went to the investment community and said, ‘They want to see a demo, and we need to raise [money] to do that.’ It’s kind of a ‘we need money to go make money’ situation, and we were too far along to raise that young money, if you want to call it that.”

Armenta said the timing was bad for a shift in strategy. “You know, there’s a version of this where if we had decided early on, ‘Hey, we’re going to build a military drone first and put all of our effort into that’ … I think we would have been able to sell it without a problem in the time frame that we had,” he said. “But we didn’t really decide that until midway through.”

Ironically, at the same time Outbound Aerospace was running on empty, the buzz surrounding the venture was revving up.

A month ago, the BBC featured Outbound alongside JetZero and Volatus Aerospace’s Natilus project in a story about the rising interest in blended-wing aircraft designs. And two months ago, Lee said in a LinkedIn post that he was “excited for y’all to see what’s next.”

“That post was leading into several discussions with investors to go do the DoD work that we needed to do,” Lee said this week. “We had half of our round secured at that point, we were talking to a number of other players, and we had the DoD product ready. … At that point, I was expecting investment to come on pretty quickly and [we could] start talking about that publicly. It never came through.”

So, what’s next? Outbound’s website still touts the Gateway drone as well as the 254-passenger Olympic airliner, which is said to be “coming in 2033.”

Lee promised that those concepts won’t be “disappearing into the ether,” and Armenta plans to make sure they don’t.

“We designed not one or two, but five novel transport-category aircraft at Outbound … and all of them are pretty neat,” he said. “I’m going to spend a little bit of time talking about those more publicly over the next couple of months. Maybe next year.”

Both founders are taking time to consider their next steps.

“I’m doing some consulting,” Lee said. “I am advising a couple of friends and also interviewing at various companies. Actually, part of what I’m trying to do is pick what the next few years of projects look like. I’m taking a pause on running a startup directly. I’ll probably be back at that at some point, but not for the next few years.”

Armenta is also helping out some friends in the aerospace industry while he takes stock of what he’s learned over the past couple of years.

“We were a lot closer than we had any right to be,” he said. “The thing is, there’s so much hunger in the market, and in every market for new aircraft across the board. We saw that in the drone space, but it’s really there in the commercial space and even in the business-jet space.”

Even though Outbound’s fortunes have fallen back to earth, Armenta is still looking up. “This has been something that I’ve been wanting to do — literally — for 30 years,” he said. “I’m 34 years old, and I can remember being a very small child and wanting to build aircraft. This has never stopped.”

The lessons learned at Outbound have only heightened his resolve. “Through this journey over the last couple of years, I saw a small, constrained number of errors that we made,” Armenta said. “I think that in the future, with a slightly different strategy, with all the knowledge and information and preparation that I have now … I’ll be back. Like I said, I’ll be back.”