The freight forwarding startup Instafreight is liquid and has just won a new major customer – but it still had to file for bankruptcy. A change in the laws is to blame.
A law weakened the insolvency regulations in recent years – it has now expired. CJ Burton/Getty Images
The news may have surprised many: In December 2023 it was announced that Instafreight had filed for bankruptcy. The digital freight forwarding platform was considered one of the model startups: Since it was founded in 2016, the company has received more than 70 million euros in equity and debt capital from investors, and the logistics company has shone with impressive sales figures and won prizes. So what happened that the company is now facing possible bankruptcy?
“Balance sheet over-indebtedness” is the key word in the Instafreight case. This is not uncommon among startups – but it can become a problem in a special situation. Just like now with Instafreight, explains co-founder and managing director Philipp Ortwein in an interview with Gründerszene.
Special rules apply to companies with borrowed capital
That’s what it’s about: At the turn of the year 2021/22, the logistics startup completed the last round of financing. At that time, Instafreight said it received more additional capital than ever before: 40 million euros. The financing round was led by Heliad and the European Investment Bank (EIB). The latter contributed debt capital in the form of a loan. And that is exactly what has become a problem for the startup.
Paragraph 19, paragraph two of the Insolvency Code stipulates that companies that have received a loan must be fully financed for at least 12 months – otherwise there is over-indebtedness and the company is obliged to file for bankruptcy.
What does Instafreight do?
The startup of the corporate developer Rocket Internet was founded in 2016 by Philipp Ortwein and Gion-Otto Presser-Velder. Presser Velder died in 2017, and Maximilian Schäfer stepped in as second managing director.
Instafreight started with the aim of shortening the supply chain in the freight industry and extracting sales margins from it. The company sees itself as a digital shipping company for business customers. It specializes in fleet scheduling and vehicle deployment control. Drivers receive transport orders via the app. They or their shipping companies want to use this to put trucks on the road that are more fully utilized. Conversely, companies place freight orders, which the startup brokers to shipping companies at a fixed price. Customers can track every shipment online. The company is active in Germany and neighboring EU countries.
It is precisely this law that has recently been significantly weakened: In October 2022, the Bundestag passed the so-called “Law for the temporary adjustment of restructuring and insolvency regulations to mitigate the consequences of crises”, in short: SanInsKG. The aim of this change in the law was to alleviate the obligation to file for insolvency due to excessive indebtedness. The government was reacting to the significantly increased burden on the economy in the wake of the Ukraine war. The change in the law stipulated, among other things, that companies only had to be fully financed for four months instead of 12 months in order to take out a loan. The aim was to prevent numerous companies from having to file for bankruptcy that could have continued to exist. A similar law had already been passed in the wake of the corona pandemic. The more relaxed regulations have applied to companies since the beginning of 2020. Until now.
“I wonder how many founders even have this on their radar”
The economic situation has hardly improved in the meantime, but the regulations of the SanInsKG expired at the end of 2023 without an extension. The 12-month period has applied again for companies since 2024. From founder Ortwein’s perspective, this means: Although the company is liquid and was recently able to win another major customer with DPD – alongside other major customers such as Coca-Cola and Ikea – it had to file for bankruptcy at the end of 2023 due to excessive indebtedness in order to avoid delaying bankruptcy to make it punishable. Founder Ortwein says: “I wonder how many founders even have this on their radar.” Because other companies could currently be in the same situation. Instfreight’s insolvency administrator Philipp Hackländer confirmed the startup’s special situation to Gründerszene. He is not aware of any similar cases so far. When asked whether he thought the change in the law could cause problems later this year, he replied to Gründerszene: “It could be.”
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Almost two years after Instafreight received the loan from the EIB, Ortwein is now taking a more critical view of this type of financing. The loan has had another disadvantage for Instafreight in recent months: When the startup was recently looking for new capital to secure financing for a longer period of time, the negotiations failed, not least because of the existing loan. In the event of a possible over-indebtedness insolvency, debt investors such as the EIB will get their money back before the equity investors – regardless of whether they invested later. Investors who were willing to give Instafreight money (again) would therefore have insisted on a special regulation. However, the EIB and the potential investors were unable to reach an agreement, says Ortwein. In the end, no new round of financing came about.
Ortwein says that he definitely doesn’t want to “point the finger at the EIB.” “I still think that venture debt is a cool financing instrument, but it can be used when there are more difficult phases – in the market or in your own company this really gets on your feet. Just like we do now,” says the founder.
What’s next for Instafreight?
The company’s goal now is to find either strategic investors or buyers. Ortwein believes the latter is more realistic. The only problem is the timing: The US competitor Convoy, which was financed by Jeff Bezos and Bill Gates among others, is currently also looking for a buyer. Just like DB Schenker.
Nevertheless, Ortwein is confident. He believes in his company and the model behind it. “We have a lot of large customers, it wouldn’t make any sense to stop it now,” he says. It is currently being restructured – also with the help of the insolvency administrator. The company’s portfolio “will certainly have to be made smaller,” said Ortwein. In the past, the company has, among other things, moved more and more away from the pure freight forwarding business. That is too costly.
Instafreight wants to concentrate on managing transport instead. The startup continues to handle the brokerage and handling of logistics – but not the price negotiations. Like many startups, Instafreight also wants to become less dependent on investors in the future and slowly but surely move towards profitability.
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