Merlin is a leading U.S.-based developer of cost-effective, takeoff-to-touchdown autonomy for both legacy and next-generation airborne systems. Our aircraft agnostic, AI-powered software is purpose-built for military and civil programs, and is powering an expanding range of missions and aircraft, proven through hundreds of hours of autonomous flights from test facilities across the globe.
To put it simply, our software enables aircraft to operate with reduced or no crew. The real-world deployment is currently focused on reduced-crew operations, meaning the software functions as a co-pilot to the human pilot, with fully uncrewed operation remaining in the company's long-term strategic roadmap.
We are the first company to receive both the FAA and CAA certification basis for autonomous flight. With a prime military contract, Merlin is helping to solve national security challenges through safe, reliable autonomy.
We were valued at $800 million pre-IPO, based on 2025 revenue of $8.5 million — and we are projecting growth to $32 million in the 2026 fiscal year.
Backed by roughly $130 million in venture funding and a $105 million USSOCOM IDIQ prime contract, Merlin pairs commercial momentum with defense-grade credibility.
Merlin Labs is a newly public ($800M) flight autonomy software startup with $100M+ in U.S. defense contracts (USSOCOM C-130J & KC-135), a Northrop Grumman partnership, and a joint FAA / New Zealand CAA certification pathway. Its product, the Merlin Pilot, is aircraft-agnostic and can fly takeoff-to-touchdown.
Merlin's $8.5M 2025 revenue cannot justify an $800M valuation on the U.S. defense pipeline alone. To grow into the multiple, it must expand its defense and civil footprints, and seek growth into other international market(s).
Where should Merlin take its autonomy technology next, and through what entry mode and structure, to convert technological leadership into durable international revenue without overextending a young, pre-profit company?
Japan, via a joint venture with a Japanese trading house and an aerospace specialist, on a dual track: leverage the U.S.–Japan alliance and existing C-130 credibility for defense, while attacking the civil cargo pilot shortage with crew-reduction autonomy, spanning over 7 years of implementation roadmap.
The actors whose alignment Merlin's entry depends on — and what each one wants.
Holds the IP, the FAA / NZ CAA certification basis, and the flight training data.
What they are expecting from the Japanese entrance are: preserving their automation moat on a global scale, receiving desirable JV equity returns, and utilizing Japan as the reference market for broader Asia-Pacific expansion down the road.Co-owners of Merlin Japan. The aerospace specialist contributes airframe integration and MRO (maintenance, repair, and overhaul) infrastructure; the trading house opens up customer relations to MoD, JCAB, and airline customers.
They want a durable, high-margin platform partnership that strengthens existing aerospace positions.JCAB controls civil type certification under the 1952 Civil Aeronautics Act, and the Acquisition, Technology & Logistics Agency under the MoD oversees defense equipment procurement.
They want defensible safety cases, demonstrated capability, and continued oversight over Japan's aviation regulatory environment.Concentrated buyer base across civil cargo and national security.
They want pilot-shortage relief, unit-cost reduction, and demonstrated safety record before fleet commitment.Japan's industrial policy authority and its government-backed investment vehicle. METI seeks to promote FDI into Japan and has set a goal of ￥100 trillion of inbound investment into Japan by 2030. JBIC is named under the 2025 US–Japan bilateral framework, which names AI as a target sector for Japan-affiliated investment vehicles
They want domestic capability growth, jobs from the tech transfer, and strategic alignment with national policy.Recognized labor representatives whose engagement is critical given flight autonomy's potential threat of taking over the pilot's jobs.
They want assurance that crew-reduction augments rather than eliminates pilot careers.Not stakeholders in the conventional sense, but regulatory gatekeepers whose clearance is required for the JV to form and operate, especially concerning any transfer of Merlin's technology and sales to the Japanese MoD and governmental bodies.
They want assurance that Merlin's tech transfer aligns with US national security policy and alliance commitments.Depopulating regions and outer islands benefiting from the regional-connectivity narrative tied to Japan's national revitalization policy.
They want sustained air links and economic vitality in declining regions.Macro forces shaping Merlin's entry into the Japanese market.
Japan is amidst its largest defence policy shift since WWII, currently on track to commit 2% of its GDP by fiscal 2027 towards defense spending amid growing security challenges from countries such as China and Japan (as opposed to its long-standing practice of keeping defense spending around 1% of GDP)
Japan's labour force has been in constant decline since 1995, and its working-age population is projected to decline b 31% from 2023 to 2060, while its old-age dependency ratio will rise to 74%. Yen's persistent weakness relative to USD has undercut the purchasing power of Japan's defense investments. Labour shortage + Yen weakness make Merlin's automation technology a cost-effective investment.
Japan currently has 7,100 pilots and the government projects another 1,000 needed by 2030 to help meet its target of attracting 60 million tourists that same year. Due to a combination of factors, including many pilots near retirement age by 2030, limited training capacity, and restrictions surrounding foreign pilots' hiring, Merlin's automation provides a scalable solution to address these challenges.
Japan's aerospace and defense sector features world-class manufacturer including Mitsubishi Heavy Industries, Kawasaki Heavy Industries and more, but no Japanese company has a Merlin-equivalent take-off-to-touchdown flight-autonomy product. With a total value of CAD$77.4 billion for Japan's aerospace market in 2024, and expected to grow to $116 billion by 2033, Merlin can seek local heavyweight partners to contribute the software layer they don't have amidst this growing market.
MLIT/JCAB conduct their regulations under the 1952 Civil Aeronautics Act, which is based on the Chicago Convention, and amended through the Diet (Japanese equivalent of Congress). Even though no autonomous-flight framework exists for crewed aircrafts yet, SkyDrive's 2022 JCAB certification basis offers a workable precedent for Diet to amend the regulations for Merlin's technology.
In 2022, Japan proposed legislation that mandates sustainable aviation fuel must account for 10% of aviation fuel by 2030, putting persistent cost pressure on low-margin routes. Meanwhile, depopulating regions and outer islands face collapsing air links under the government's Chihō Sōsei (regional revitalization) policy. Flight autonomy lowers per-flight-hour cost enough to keep marginal routes economically viable.
Comparisons & Strategic Implications.
Out of the 6 Hofstede dimensions, 3 stand out particularly: long-term orientation, motivation towards achievement and success, and uncertainty avoidance.
For long-term orientation (Japan 100 vs. US 50), Since Japan is at the maximum of this dimension (as opposed to the US's midpoint, a joint venture with capital commitment, long time horizon, and shared governance could be a culturally aligning entry mode for Merlin.
For Uncertainty avoidance (Japan 92 vs. US 46), as one of the most risk-averse cultures globally, instead of advocating for new, unproven technologies that has high upside (no-crew autonomy in Merlin's case), Merlin should rely on reduced crew autonomy and provide extensive safety documentation, flight logs, and third-party validation (FAA/CAA) for its technology, and anchor its regulatory approval in the precedent of SkyDrive's JCAB pathway.
For motivation towards achievement and success (Japan 95 vs. US 62), Japan is a culture that values excellence, performance, and engineered reliability, and Merlin could take advantage of this dimension by introducing its superior engineering into the Japanese market, proven by its flight hour data, safety record and technical specifications.
The remaining three dimensions (power distance, indulgence, and individualism) are secondary considerations that determine how things are executed, rather than the strategic structure. Power distance (Japan 54 vs. US 40) poses a moderate difference, but still enough that Merlin should match seniority levels in all meetings. For example, it would be interpreted as disrespectful if a mid-level manager is assigned to a meeting with a senior executive.
As for indulgence (Japan 42 vs. US 68), since Japan is a culture that prefers discipline and seriousness, Merlin should position itself as a mission-driven engineering company aiming to resolve a national problem.
Individualism (Japan 62 vs. US 60) wise, Japan and the US have essentially no difference, meaning the two cultures align closely on this front and it will likely not be a source of conflicts upon Merlin's entrance into Japan.
Resources & capabilities, the value chain, and Porter's Five Forces — home market vs. target market.
Merlin holds approximately $183M in cash following its March 2026 SPAC merger and $80M PIPE financing, an aircraft-agnostic Merlin Pilot autonomy capability with more than 800 hours of accumulated flight data and a joint FAA and New Zealand CAA certification basis, a workforce of approximately 170 employees concentrated across Boston, Los Angeles, Denver, and New Zealand, and over $100 million in cumulative US Department of Defense prime contracts including USSOCOM C-130J, KC-135, and MDA programs.
Merlin demonstrated its capital-raising capabilities via its $200 SPAC merger plus $80M PIPE backed by Google Ventures, Baillie Gifford, and more. Its brand recognition is well-known within the US defense and regulatory circles via its relationship with various defense departments, but its presence is relatively unknown in Japan. Its project management capabilities are demonstrated through its multiple simultaneous certification programs, including USSOCOM C-130J program, AMC D2P2 KC-135 autonomous integration program, and more, but cultural adaptation (such as longer planning horizons) is needed to function in Japan.
Porter value chain — support & primary activities, US-anchored vs Japan-localized.
Finance, legal
AI + aerospace engineering
Honeywell, GE, Northrop
Compute, sensors, data
Software
Mojave, NZ
FAA + JCAB
MHI / KHI
Local MRO
High-margin value is created in the US through software, certification, and IP. Integration and sustainment are executed in Japan through aerospace partners. The joint venture structure links the two.
Well-capitalized defense conglomerates (Lockheed, Northrop, Boeing) and VC-funded startups (Reliable Robotics, Skyryse) circle the autonomous flight market. FAA certification is the moat for Merlin, but it's a conventional path with multiple players advancing.
Same conglomerates could enter but face higher costs: JCAB certification, Diet-level legislative work, and cultural/language barriers. No domestic Japanese pioneer to compete against, and SkyDrive's eVTOL precedent applies to a different aircraft class.
The aircraft-agnostic architecture decouples Merlin from any airframe OEM. Compute and sensor inputs are commodity, as there are many GPU vendors and sensor manufacturers, and no single supplier has pricing power (unless their products are massively superior compared to their competitors'). The US AI engineering labor market is deep enough that Merlin is not hostage to any one talent source.
The same architectural point holds: compute and sensors stay non-concentrated regardless of geography. Where Japan differs is on the labor side. The country trains fewer AI engineers, and the ones it does have tend to stay put — Japanese hiring norms favor long careers at one firm rather than the mid-career mobility that defines US tech. The pool of engineers who can work across both AI and aerospace certification is genuinely small. A JV partner helps here because MHI or KHI can hire through channels Merlin can't access on its own, though it doesn't make the talent shortage go away.
DoD operates as effectively the solo buyer for defense autonomy. Commercial cargo buyers are a small, sophisticated buyer set. Sales cycles run multi-year because the buyers demand exhaustive flight data and certification proof before committing fleets. Pricing power sits with the buyer, not the supplier.
Tighter than the US on every dimension. ANA Cargo, JAL Cargo, and the JAL-Yamato JV constitute the entire set of commercial cargo buyers. Sales cycles run longer because consensus-driven procurement compounds an already-conservative aerospace culture. Pricing power sits firmly with the buyer.
The substitute for autonomy is the traditional response to the pilot shortage: significantly increased pay, expanded hiring, and new training initiatives. US regional first-officer hourly pay rose from $52 to $93 between 2021 and 2024, major-airline contracts delivered 30–50% cumulative raises across all five majors between 2023 and 2025, and are expecting to hire 10,000+ pilots over the next couple of years (varies by companies). These responses keep the substitute viable in the US.
The alternative to flight automation is structurally weaker, with factors including the 2030 pilot retirement wave, limited training capacity, and budget and language-barrier constraints on foreign hiring capping substitution options.
Similar to what was covered under threat of new entrants, defense conglomerates such as Lockheed and Northrop and VC-backed startups such as Reliable Robotics and Skyryse have created a crowded, capital-intensive space to compete in the flight automation pathway.
No domestic Japanese competitor with an equivalent capability. Foreign rivals (Reliable, Skyryse) have not established Japan presence. Whoever enters first will have a first mover's advantage, but the window is closing fast with defense conglomerates planning their Asia-Pacific expansions.
Mode, rationale, and structure for entering the Japanese market.
Form Merlin Japan, a Japan-based JV between Merlin Labs, a Japanese aerospace giant (such as KHI or MHI), and a major trading house (such as Mitsubishi Corporation or Mitsui). This allows Merlin to become an insider who shares the regulatory and political risk with its partners, and aligns with Japan's long-term horizon-oriented business culture.
Export-only entry mode is rejected because it signals short-term orientation in a long-term-oriented culture. licensing is rejected because it cedes the data feedback loop, as every flight hour Merlin's competitors don't see is a flight hour Merlin's global model doesn't learn from. Over time, the partner accumulates the local data advantage as Merlin loses out on strengthening its competitive moat. Greenfield is also rejected because it is nonsensical for a pre-profit company to commit to a capital-intensive entry mode with no presence and connection in the Japanese market.
Merlin will hold a minority stake of approximately 30-40% and license its automation IP into the JV under Japan-territory exclusivity. All flight and training data will be monitored and overseen by the Parent company in order to keep strengthening its competitive moat. The aerospace conglomerate will provide integration with hardware, MRO, and certification engineering capacity, and the trading house will open the MoD, JCAB, and airline channels through its local connections to Merlin.
Focus on relationship-focused B2G and B2B sales instead of mass marketing, and fully utilize the trading-house partner's existing relationships with MoD, JCAB, and Japanese airlines. Marketing theme should prioritize safety record, flight hour data, and cost-effective solutions in the face of the 2030 pilot shortage. Merlin should also increase its Japanese presence through industry events such as Japan International Aerospace Exhibition to introduce its technology to the Japanese market, advocating for its reduced-crew enablement instead of its no-crew vision.
Through the aerospace partner's existing infrastructure, the software integration, installation, and ongoing maintenance service across customer fleets can be collaborated between the two parties, while the partner handles the building of the physical infrastructures. This imitates Merlin's existing US partnership with GE Aerospace that started in September 2025, where GE's Flight Management System includes more than 14,000 aircraft globally, and provides the opportunity to integrate Merlin's advanced capabilities to legacy military platforms and next generation aircrafts.
Two technical challenges need to be addressed upfront. Firstly, Merlin needs to gain approval from the JCAB certification pathway, based on SkyDrive's eVTOL precedent established in March 2022, with Merlin's existing FAA + NZ CAA joint basis as the reference framework. Secondly, Merlin Pilot's natural language processing model is capable of listening to instructions from air traffic control, and responding over the radio using a computerized voice, navigating the aircraft, and executing the landing. However, since all documented usages have been in English-language airspace, deploying the same technology on Japanese routes would require language-model adaptation to Japanese.
Merlin should establish a small expatriate core (5–10 Merlin engineers) paired with heavy local hiring through the aerospace partner's recruiting infrastructure. Key operations remain in the US and will serve as a supporting function to the Japanese operations. Furthermore, Japanese labour markets continue to be characterized by lifetime employment and seniority-based compensation, meaning that Merlin should respect these norms while structuring its career-progression path and retention investment. Lastly, bilingual cross-cultural training should be conducted in both directions.
Granular, sequenced, and de-risked — the implementation plan that answers "so what, now what."