State space modeling with disturbances using Matlab
You have a nonzero operating point. If you had chosen an equilibrium operating point, this situation would not have occurred.

With the equation you have given, if you choose the states as \$\left\{x_1=\frac{g m}{K_d}+V_z,x_2=v_1^2,x_3=v_2^2,x_4=v_3^2,x_5=v_4^2\right\}\$ you get a linear state equation:

\$ \dot{x}_1=\frac{K \left(x_2+x_3+x_4+x_5\right) C_m}{m}-\frac{x_1 K_d}{m} \$

I am guessing this would upset some other state equation. Then you have to consider all the states and equations together. But, as I said before the best approach is to do this at the linearization step.