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Why VCs deliberately let startups go bankrupt

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Why VCs deliberately let startups go bankrupt

Investors know exactly about the financial situation of their protégés. Allowing startups to slide into bankruptcy can also have advantages for them. Getty Images/sesame

Be it the crash of the tax startup ExpressTax, the ailing moving platform Movinga or the grocery retailer Sirplus, where the latest cost-cutting measures were unsuccessful: the list of startups that have had to declare bankruptcy in the past few weeks is long – and is expanding every day. It fits in with the general trend: According to the credit agency Creditreform, a total of around 18,100 German companies had to file for bankruptcy in 2023 – an increase of 23.5 percent compared to the previous year. Of these, around 42 percent had the legal form GmbH, which also applies to the majority of startups.

Creditreform assumes that the number of commercial bankruptcies will continue to rise in the coming months. The number of cases has almost normalized and the special effects during the pandemic, in which companies provided financial aid and KfW special loans The measures that could save people from bankruptcies have largely fizzled out, explains the head of economic research, Patrik-Ludwig Hantzsch. “Insolvencies are currently developing very dynamically,” the expert told Gründerszene. “We speak weekly with insolvency administrators and restructuring companies. Both tell us that they are getting more orders than they have had in years.” According to Hantzsch, law firms are currently hiring more staff in order to be able to process the flood of applications from entrepreneurs in the event of insolvency.

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